Estate planning can be a time-consuming, complicated process that could end badly if all aspects of the estate and correlating legal aspects are not carefully considered. If estate planning were not complicated enough, the digital age has brought about cryptocurrency, changing the game.
Cryptocurrency has added a layer of digital complexity to the traditional business model of value and trade. Most people, unless involved in the current trends of investing, have trouble merely describing cryptocurrency, let alone knowing what to do if they were to inherit some.
Traditional assets, such as real estate, stocks, and bonds, leave a paper trail of certificates or other legal documents that are easily interpreted. Cryptocurrency, however, occupies virtual space that needs sort of a digital fingerprint to understand how to access it, interpret its value, and use it in trade. Cryptocurrency is a decentralized medium of exchange: it does not have a central authority to manage it or measure its value.
Despite its cryptic nature, cryptocurrency is here and is already part of many current and future estates. Read on for a closer look at what defines cryptocurrency, and how to ensure that your heirs are not left in virtual space without the ability to inherit your digital assets.
What Is Cryptocurrency?
Cryptocurrency is an encrypted, digital medium of exchange. It can be used to buy goods and services or can be held and used as assets. It is recognized as currency and is taxable, and it requires specific laws when named as part of an estate.
Cryptocurrency uses keys and access codes. These modes of entry require certain PINs, passwords, passphrases, timelock or multisignature requirements, and more.
Cryptocurrency is stored in a digital wallet, which is assigned a blockchain address that allows the trading of assets. The wallet has a private numeric key that is needed for transactions to occur. A blockchain is a ledger for recording data, transactions, documents, etc. The data is stored in blocks, which are chained in cryptographical sequence.
What Are the Complications of Cryptocurrency Regarding Estates?
It is crucial to the executor of an estate to know the exact contents of the decedents digital portfolio. The executor must also be able to know where to find the wallet and how to access it. Without being left a detailed explanation of how to find, access, and interpret the cryptocurrency, beneficiaries could be left out in the cold with no way of receiving what is rightfully theirs.
Just as with any physical asset named in an estate, the lack of understanding the legal or tax ramifications of cryptocurrency as part of an estate can be costly.
What Are Ways to Ensure That Your Heirs Will Receive Your Cryptocurrency?
As with any asset, it is best to set up a living trust and name your digital wallet and its contents in explicit detail. Research what legal ramifications there are for inheriting cryptocurrency as part of an estate. Leave all relevant information about your digital assets and define how your assets will be transferred.
Make sure to include a memorandum to provide any access codes or keys necessary to access the wallet. They should be kept in a secure location along with any passwords or other important information. You should also leave a detailed guide that could help your executor deal with the complexities of handling the cryptocurrency.
Putting your cryptocurrency in cold storage is a good idea. This means that you are taking your assets offline. This will protect your digital assets from theft or cyberattack. Talk to a reputable wills, trusts, and estate lawyer, ensuring that your digital assets are safely transferred as you originally intended.
Plainfield Wills, Trusts, and Estates Lawyers at Herold Law Handle Estate Planning for Digital Investors.
If you have digital assets or other investments that you would like named in your estate, you need a competent and experienced lawyer to ensure they are protected. Our experienced Plainfield wills, trusts, and estates lawyers at Herold Law will work hard to ensure that your estate is sound and that your beneficiaries receive all that you have left to them. Call us at 908-647-1022 or contact us online. Located in Warren, New Jersey, we represent clients in Warren, Plainfield, and throughout New Jersey.