Your Guide to Cryptocurrency Estate Planning

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As the finance industry changes and more people invest in cryptocurrency, we’ve been getting legal questions about cryptocurrencies. Here’s what you need to know.

Author: Paul Black

Paul’s experience as the son of two parents with big health challenges is what led him to the work he does today and gives him first-hand knowledge of the challenges that many caregivers and family members face. After graduation from GSU Law, Paul was chosen from dozens of applicants nationwide as one of three 2010-2011 Borchard Foundation Law & Aging Fellows. Paul has been named as  a SuperLawyers “Rising Star” in the area of Estate Planning and as a member of Georgia’s “Legal Elite” by Georgia Trend magazine. Published on: October 05, 2020. Last updated on: September 17, 2021.

What is Cryptocurrency?

Understanding Cryptocurrency and Estate Planning section

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Cryptocurrency is a digital currency that uses cryptography to secure transactions. Any central authority does not control it, and it can be used to buy things electronically. You can use it just like the money in your bank account or debit card.

 

Difference Between Cryptocurrency and Traditional Money

There are some key differences between traditional currencies and cryptocurrencies.

For example, cryptocurrencies are decentralized – meaning any one institution or government doesn’t control them – while traditional fiat currencies (like dollars) are issued and governed by governments worldwide.

Instead of being printed on paper bills, cryptocurrency exists as code on a computer network known as blockchain technology.

This means that anyone with an internet connection has access to their own personal wallet where they store funds for future use without having to worry about fees or interest rates imposed by banks or other financial institutions.

Understanding Cryptocurrency and Estate Planning

It’s never too early to start planning for your family’s future.

If you have questions, our Georgia estate law firm is here to help. There is no commitment, and we provide free initial 15-minute phone calls. We look forward to meeting you.

Cryptocurrencies, such as Bitcoin, Dash, Ripple, and Zcash are increasingly popular inclusions in detailed estate plans. The IRS views Bitcoin as personal property instead of currency for tax purposes, so some tax benefits for prudent investors who accumulate digital assets.

However, the introduction of digital cash can create some issues. Bitcoin wallets are private since only someone with access to the digital wallet can access its contents. If you pass away unexpectedly without a proper estate plan, your cryptocurrency accounts and other properties die with you.

Whether you’re exploring your cryptocurrency options for the first time or you have an outdated estate plan, the attorneys at the Law Office of Paul Black are here to help.

We can offer solid advice regarding the cryptocurrency legal landscape and help you prepare a strong document that plainly communicates your wishes and upholds the security of your digital assets.

Why Adding Cryptocurrency to Your Estate Plan Matters

Benefits of Estate Planning for Cryptocurrency

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It would help if you protected your cryptocurrency by adding it to your will or trust as property with a clear description of the assets and their current market value.

This will ensure that they are distributed according to your wishes when you pass away without additional legal fees or court costs involved in settling disputes over who gets what from the estate.

Your heirs won’t be fighting over whether bitcoin was worth $10k per coin at the time of death or $20k per coin. They’ll know exactly how much each asset is worth at the time of distribution based on its current market price.

What Happens If a Bitcoin Owner Dies?

Unlike conventional assets, like your home, real estate, the money in your bank account, or even stocks, crypto accounts like Bitcoin are purely digital assets. This means that they could be lost forever if a Bitcoin owner dies unless the appropriate precautionary measures are taken.

During the owner’s life, cryptocurrency is accessed using a “private key.” The private key is transferred to a living beneficiary, which can be a complex process.

For crypto accounts to be transferred to somebody else, they should be both technologically accessible and legally transferred. The estate administrator can either sell it or transfer it per the will.

The first problem here is that many individuals do not thoroughly plan for their cryptocurrencies. Additionally, if your administrator knows that your cryptocurrencies exist, but they do not have the private key or other means to access them, there is no chance to recover these assets.

Since accessing cryptos requires access to a lengthy private key or password, somebody is needed to access these codes to access and distribute your digital currency as you wish. As such, keeping up-to-date lists of virtual assets and creating a strategy for how heirs can access them is a significant and growing area of law.

It is a good idea to assume that your beneficiaries (people who will inherit your properties under your will or through your trust) know nothing about cryptocurrency accounts. Using plain language, you should draft a step-by-step guide for your beneficiaries explaining how to access your digital capital gains.

After writing the guide, ask a trusted friend or family member with no knowledge of how cryptocurrencies work to follow the steps. If they can, that is a good sign that your future beneficiaries will do the same.

If this sounds difficult, rest assured that our knowledgeable estate attorneys are experienced in helping clients draft these types of guides. Let us help you ensure that your heirs can access the cryptos you have worked hard to obtain.

Cryptocurrency Estate Planning Methods

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Benefits of Estate Planning for Cryptocurrency

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Estate planning for cryptocurrency requires a balance between the need to keep private keys secret to protect the security of the digital currency while alive and the need to pass these private keys on so they don’t remain stuck in the blockchain after the investor’s death.

As experienced attorneys, our law firm can help you find a solution that maintains this balance to ensure that your cryptocurrency can be appropriately passed on to your family.

It is a process of preparing for how your assets and personal property will be transferred to others at the time of your death, with wills and trusts playing vital roles in the process.

Georgia will should be executed under stringent procedures that serve evidentiary, cautionary, channeling, and protective roles. In other words, requiring compliance with procedures helps ensure that a will is not tampered with and that the intent of the departed is effectuated.

There are many options and circumstances to think about when establishing an estate plan that protects your legacy and personal asset in addition to meeting your cryptocurrency objectives. Crucial choices must be made with the guidance of experienced cryptocurrency attorneys.

At the Law Office of Paul Black, we have the specialized skills, resources, and experience you need to ensure that your traditional and digital assets are in good hands.

Crypto Estate Planning Methods

To ensure that your loved ones can access your cryptocurrency after your death, you will want to:

  • List your cryptocurrency in your will.
  • Include details about your digital wallets in your will.
  • Add a memorandum to your will with passwords and PINs.
  • Include a detailed guide to describe how your beneficiaries can access your cryptocurrency.

Since there is no physical record of cryptocurrency, you must state it in your will and let the individual managing your estate know about it.

Unlike a bank account, the trustee does not have to offer a death certificate or Power of Attorney to access your crypto. As long as the fiduciary has your private key or passcode, he or she can take control of the currency. So, you’ll want to be sure that your trustee is somebody you can trust with these details.

Where Can I Leave My Private Key Information?

Many investors choose to store this information in a safety deposit box or another similarly secure location.

You should avoid putting the passcode straight into your files or estate planning documents. If they go through probate, they might end up being public documents. Rather, note the cryptocurrency as an asset in your will and put the instructions on accessing it in a different file referenced in the will.

These instructions will need to be as specific as possible and updated periodically as needed. If you lose the private key to your Bitcoin, it might not be possible to recuperate it. So, it is essential to save it in a safe location like a safe deposit box, as you would with other valuable personal property.

If you’re still worried about security or what will happen to your cryptocurrency after your death, you can put your cryptocurrency into a trust. This will keep your cryptocurrency out of probate and maintain the security of vital information since trust documents do not typically enter the public record.

If utilizing a living trust to pass down your cryptocurrency accounts interests you, don’t hesitate to seek assistance from a reputable estate planning attorney or law firm.

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Our Estate Planning and Cryptocurrency Services

Our Estate Planning and Cryptocurrency Services

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You can protect your cryptocurrency accounts and transfer them to successors through your estate plan with cautious preparation. At the Law Office of Paul Black, our Atlanta asset protection lawyers work with clients to establish a reliable and secure access strategy for their cryptocurrency. 

The following are a few of the services we offer:

  • Choosing an individual who can access the cryptocurrency. Ideally, this individual should know about cryptocurrency and should not be a beneficiary of the estate.
  • Composing an instruction letter for distributing the cryptocurrency that does not consist of any crypto keys, access codes, or seeds. This letter should instead contain the location and inventory of the properties and the list of hardware required to access them.
  • Advising you on storing hard wallet backups in access-controlled areas in a water-resistant, fire-resistant container. 
  • Incapacity planning by including language in a Durable Power of Attorney supplying access to the cryptocurrency in case you become disabled.
  • Dispersing the cryptocurrency through a will and naming the individual selected to access these assets on behalf of the estate.
  • Placing the cryptocurrency in a trust to protect these assets and prevent the lengthy probate procedure from posing security risks and unnecessarily tying up assets.

 

The above list is not exhaustive. When you meet with our Georgia estate planning lawyers, our law firm can guide you through each of the ways we can help protect your cryptocurrency for your beneficiaries.

Contact a Cryptocurrency Estate Planning Attorney

As it grows in popularity and its investors begin to age, the future of cryptocurrency is uncertain. However, what is certain is that you need a detailed and up-to-date estate plan, and you should not let your financial investment die with you. 

Since this technology is still in its infancy, the laws regarding cryptocurrency are rapidly evolving and changing.

Even if you already have an estate plan covering your virtual assets, it’s important to seek renewed legal advice and re-evaluate your strategy frequently with a digital cash estate planning attorney to ensure that your estate plan abides by all updated laws and regulations well as your own personal circumstances.

Our attorneys offer customized legal advice and prepare estate planning documents to fit each person’s unique situation.

No matter your situation, we invite you to schedule a consultation with our law firm, where we will listen to your objectives and guide you through your options. Contact us online or call (404) 383-6585 today to get started.

Contact a Cryptocurrency Estate Planning Attorney

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