Attorney
One of the goals of effective estate planning is to ensure that all your assets are included in the plan. Assets may be distributed through your will, a trust agreement, jointly titled property, or a beneficiary designation. However, the key is to identify all assets and ensure those assets are accounted for somewhere in your estate plan. Your California asset protection lawyer can help you devise a plan to distribute your assets after your death, but only if your attorney knows about the assets.
Therefore, do not forget to list cryptocurrency as an asset for estate planning purposes. You need to discuss how your Bitcoin and other cryptocurrency will be distributed to your heirs after your death with your California asset protection lawyer.
The Challenges Cryptocurrency Poses for Estate Planning
Probate law has established clear ways of transferring physical assets and financial accounts to heirs after a person dies. However, cryptocurrency is a virtual asset, and the law has not caught up with technology yet, which makes estate planning for Bitcoin and other cryptocurrency more complicated.
The digital nature of Bitcoin and other virtual currency is one of the estate planning challenges faced by individuals and attorneys. There is no tangible, physical asset that can be transferred to an heir. The only “asset” to pass to an heir is the private digital key (a string of code stored on a blockchain) that allows someone to access the “wallet” containing the cryptocurrency. Without the digital key, no one can access the cryptocurrency. Therefore, if there is no provision to pass the digital key to an heir, the asset is lost forever.
Another estate planning challenge associated with cryptocurrency is security. Anyone with the digital key can access the cryptocurrency account, which makes that person the physical “owner” of the account. However, probating an estate is a public process. The documents are part of the public record and may be accessed by anyone. Therefore, maintaining the secrecy of the digital key is an essential element of protecting this asset.
Transferring Cryptocurrency Through an Estate Plan
With careful planning, you can safeguard your digital assets and pass those assets to heirs through your estate plan. Our California asset protection attorneys work with clients to develop a secure and effective access plan for their cryptocurrency. Some of the key elements of an access plan that we address with clients include:
- Choosing a person who can gain access to the digital assets. This person should be knowledgeable about cryptocurrency and not an heir of the estate.
- Writing a letter of instruction for distributing the digital asset that does not contain any crypto keys, access codes, or seeds. The letter should include the inventory and location of digital assets and the list of hardware required to access the assets.
- Storing hard wallet backups at access-controlled locations in a waterproof, fireproof container. Co