If you are someone who is particularly tech savvy, or who likes to get in on the ground floor of the “next big thing,” there is a very good chance that you own cryptocurrency. If you do, it is important to identify it as an asset within your estate plan. Because of the unique characteristics of this type of currency, failing to identify and include it in your estate plan could cause it to be lost forever after you are gone. To ensure that does not happen, a Beverly area estate planning attorney at DeBruyckere Law Offices explains how to include it in your estate plan.
What Is Cryptocurrency?
If you own cryptocurrency, you already know what it is. For those who are unfamiliar with the concept though, cryptocurrency is a digital currency that uses blockchain technology (a distributed ledger enforced by a disparate network of computers) to create a decentralized, immutable, public digital ledger. Think of cryptocurrency as “virtual” money that is not issued by a centralized government or bank. It can be used to buy and sell things but only with a computer or smart phone. Although there are hundreds of versions of cryptocurrencies, the most commonly used is Bitcoin. Other well-known types include Ripple, Dash, Litecoin, and Zcash.
Why Do I Need to Include My Cryptocurrency in My Estate Plan?
Among those unique characteristics mentioned above is the fact that cryptocurrency only exists in a virtual wallet. Unlike cash, stocks, or other types of investments, cryptocurrency is not physically held anywhere. You cannot withdraw it in a “cash” form because it only exists in digital form. Consequently, it is often the case that only the owner knows of the existence of the cryptocurrency. If you are the only person who knows that you have a significant amount of cryptocurrency in a virtual wallet somewhere, and you are killed in a tragic accident tomorrow, that cryptocurrency is likely lost forever because nobody knows of its existence. Furthermore, even if someone knows the cryptocurrency exists, they will never be able to access it unless the owner leaves detailed instructions for doing so. Unlike a bank account, you cannot include a beneficiary designation on your cryptocurrency that automatically transfers ownership to someone upon your death. Including it in detail within your estate plan prevents your cryptocurrency from disappearing into the internet’s digital graveyard following your death.
Including Your Cryptocurrency in Your Estate Plan
Simply listing your cryptocurrency as an asset is insufficient to protect its value. Instead, you need to take the following steps to ensure that your digital currency isn’t lost and, instead, ends up where you want it to after you are gone:
- Make a detailed list of all cryptocurrencies that you own. Be very specific and include the type (Bitcoin, Ripple, etc.), approximate value at the time you make the list), and location of the wallet where each can be found.
- Provide access codes. This is where it gets tricky because without all necessary access codes, PINs, and wallet locations, no one will be able to access your cryptocurrency. Once someone has that information, however, they can access and use that cryptocurrency at any time and no one can stop them. Unlike unauthorized usage of your credit card or bank account, if someone uses your cryptocurrency there is basically nothing you can do about it. Therefore, be very careful what you do with the lists you make and be very selective about who you choose to guard the information you create.
- Include your devices in your estate plan. This is where people often make a fatal mistake when trying to incorporate cryptocurrency into their estate plan. You must include the device on which the virtual wallet exists as well. Giving someone the passwords and location of the virtual wallet doesn’t help if they don’t have the device itself.
- Provide someone you trust with the information. Once you have made sure that all the necessary information is together, you must entrust it to someone. If no one knows this type of currency exists, it will just disappear into the ether and no one will be the wiser.
Contact a Beverly Area Estate Planning Attorney
For more information, please download our FREE estate planning worksheet. If you have additional questions or concerns about including cryptocurrency in your estate plan, contact a Beverly area estate planning attorney at DeBruyckere Law Offices by calling (978) 969-0331 to schedule an appointment.
What are some things I can do to protect my assets?
- Plan for the possibility of your incapacity as well as your death by creating a revocable living trust and name a successor Trustee that you trust to take over control of your assets if something happens to you.
- Plan for the high cost of long-term care.
- Consider entering into a prenuptial agreement prior to marriage, particularly if this is a second marriage and you want to protect assets meant for children from a prior marriage.
Who should I leave my cryptocurrency to in my Will?
Choose someone who understands the technology necessary to access and manage the cryptocurrency and, of course, someone you wish to inherit the assets.
How often should I update my estate plan?
Cryptocurrency is an excellent example of why updating your estate plan every few years is so important. Just five years ago, cryptocurrency was virtually unheard of outside a very small tech community. Today, you might own a small fortune in cryptocurrency. A lot can change in a few short years.