By: Bridget Burns
Most assets are relatively straightforward to deal with when creating your estate plan. Real property can be deeded to a trust; bank and investment accounts can have the title changed or transfer on death designations made out to the trust; business interests can be assigned to the trust. But cryptocurrency is unlike any other asset. Cryptocurrency doesn’t have a title document, and no names appear on the account. So far, no forms of cryptocurrency or wallets allow transfer on death designations. You can assign cryptocurrency to trusts or other entities, but the assignment alone will be useless without further planning. Cryptocurrency estate planning is the modern approach to ensuring your digital assets are distributed properly after your passing.
To ensure that your intended beneficiaries actually receive your cryptocurrency, the following steps should be part of your planning:
- Make sure your estate planning attorney knows about your cryptocurrency. By letting your attorney know, they should be able to assist you with all of the following steps that are critical to making sure your cryptocurrency is not lost. Importantly, when you are incapacitated or deceased, your estate planning attorney will be able to help your successor fiduciaries (your executor and/or trustee) and beneficiaries with securing the cryptocurrency. Finally, your estate planning attorney will be able to ensure your documents have special provisions so that cryptocurrency can be accessed properly and legally by your successor fiduciaries.
- List your cryptocurrency in your estate planning documents. Assets that are not specifically listed in a will or trust become part of the residue of the estate. Attorneys who help conduct trust administrations have various techniques to assist trustees and executors how to locate all assets that are part of the residue, but those techniques are unlikely to work for cryptocurrency, which is private and hard to find by nature. Therefore, it’s important for your successor fiduciaries to know you have cryptocurrency so they can collect it as part of your estate.
- Leave your successor fiduciaries instructions about how to access your cryptocurrency. The majority of people do not know how to access cryptocurrency, and even if someone is knowledgeable about crypto, it would be a huge task to try to locate it unless you have left specific information about how and where your cryptocurrency is stored.
- Create a mechanism by which your successor fiduciaries can access your private key(s). Even if your successors know how to find your crypto, they will have no way to access it unless they can find your keys. There is no legal document in the world that can provide access to cryptocurrency when the key is lost. This is a tricky line to walk, since anyone with your key can access your crypto at any time. You might write a memorandum and keep it with your estate planning documents; leave your information on a cold storage drive in a location your successor fiduciaries will be able to find; or use a password manager and leave instructions about how to access that manager. Again, you can discuss this with your estate planning attorney to determine the best way to give your successor fiduciaries access to your key.
- Keep your documents up to date. As you acquire more or different kinds of cryptocurrency, or use different wallets or storage devices, you will need to make sure your estate planning documents and instructions to successors contain full information. We recommend looking at your inventory and instruction documents at least every 6 months if you are actively acquiring or trading cryptocurrency.
A solid estate plan is crucial to ensuring that your heirs receive your assets - including digital assets - once you are deceased. Contact us to get started on an estate plan that suits your needs or to better tailor an existing estate plan to your unique situation.