Estate Planning When Cryptocurrency Is Involved

The Rising Popularity of Cryptocurrency in Estate Planning

Planning is crucial

You should ensure your will, trust, and durable power of attorney all contain powers over digital assets to be granted to a fiduciary who manages your estate. Your executor or trustee should also be given specific powers to access your digital assets, because, just like your estate planner, they are ethically and fiduciarily bound to keep your information private. Even when identifying these assets, the estate planner and his client should give detailed instructions about how to access a digital wallet (i.e., the private keys) and should think about passing assets down to an heir who has basic knowledge about using and managing cryptocurrency.

Estate Tax with Cryptocurrency In The Will

Estate planning when clients wish to give away cryptocurrency or NFTs, likely need the cryptocurrency assets value to qualify for the estate tax and gift tax purposes. Due to the volatility inherent in many digital assets, as well as limitations on gifts of one lifetime and exemptions from the estate tax, giving to a trust can be risky, and therefore, utmost caution should be exercised in:

1) Choosing whether or not to include a digital asset as part of a gift.

2) Determining what crypto assets might be a suitable selection.

3) Determining when is a suitable time for making a gift.

Due to significant gains experienced over the past several years with many cryptocurrencies, tracking crypto assets is important given the implications for the estate, gift, and income taxes.

Discosure of Crpyto Assets

Cryptocurrencies, a relatively new asset class, should be managed to pass through in an estate plan. The key to passing Bitcoin through your estate plan is making sure that your estate plan provides disclosure of your Bitcoin assets, and provides a safe way for you to pass on the owners private keys to your heirs.