Estate Planning with Bitcoin and other Cryptocurrency
One of the more popular investments these days, or at least one many people say they want to invest in, is Bitcoin. Bitcoin is a form of cryptocurrency. Webster’s defines cryptocurrency as: “any form of currency that only exists digitally, that usually has no central issuing or regulating authority but instead uses a decentralized system to record transactions and manage the issuance of new units, and that relies on cryptography to prevent counterfeiting and fraudulent transactions.” While Bitcoin is likely the most well known form of cryptocurrency, according to CoinLore there are more than 5,000 different cryptocurrencies in circulation. Though most people own Crypto as an investment, it can be used to buy regular goods and services.
Like any asset, you need to have a plan for what happens to your cryptocurrency when you die. Unfortunately, unlike more traditional assets, it will not be enough to simply list your cryptocurrency in your will or trust. In addition to the traditional ways of addressing assets in your estate plan, which cryptocurrency, you should also create a memorandum that provides step-by-step guidance on how to access your cryptocurrency. This memorandum should include:
the type of digital wallet(s) you have;
any computer, smartphone, or other device where cryptocurrency is stored;
links to websites for any online exchanges or password managers; and
any login and password information.
One important issue to remember is security. Accessing your cryptocurrency will require passwords and someone will need to have access to this information. While you want to keep things secret in order to protect your cryptocurrency, this needs to be balanced with the need for access after your death. You may not want to keep your memorandum in the same place as your estate plan, but rather let your fiduciaries know where it is stored. You may also want to break up the password into parts and store them separately. Most importantly, you do not want to include this information in your will, trust, or any other document that may become part of a court record.
Planning for cryptocurrencies, such as Bitcoin, is a new frontier. But it is no different in that, just like every other asset, care and consideration should be taken to make sure that it can be inherited in the easiest way possible with the least amount of risk.
This post is for informational purposes only and not for the purpose of providing legal advice. You should contact an attorney to obtain advice with respect to any particular issue or problem. Nothing herein creates an attorney-client relationship between Hallock & Hallock and the reader.