925.244.1185
San Ramon, CA

Horizon Elder Law & Estate Planning Blog

Wednesday, August 8, 2018

Cryptocurrency and Estate-Planning - What You Need to Know

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. Consider whether or not to have a secondary backup stored in another secure location that is also access-controlled, fireproof, and waterproof.

  • Including language in a Durable Power of Attorney providing access to the cryptocurrency in case of mental disability of incompetency.

  • Distributing the cryptocurrency through a will, including naming the person chosen to access these assets on behalf of the estate.

  • Consider placing the digital assets in a trust to safeguard the assets and avoid the lengthy probate process that could pose security risks and tie up assets for a year or more.

The above list is not an exhaustive list of all steps you must take to safeguard your cryptocurrency for your heirs. Our California asset protection attorneys can discuss the matter further during your estate planning session.

Contact a California Estate Planning Attorney for More Information

The laws regarding cryptocurrency are changing and evolving. Even if you have an estate plan in place that covers digital assets, you should review this plan often with your California asset protection attorney to ensure that your estate plan complies with current laws regarding cryptocurrency. Contact the Horizon Elder Law and Estate Planning Attorneys today to schedule a consult.


Archived Posts

2019
2018
December
November
October
September
August
July
June
May
April
March
February
January
2017
December
November
October
September
August
July
June
May
April
March
February
January
2016
2015



© 2019 Horizon Elder Law & Estate Planning, Inc. | Disclaimer
2333 San Ramon Valley Blvd., Ste. 145, San Ramon, CA 94583
| Phone: (925) 244-1185

Elder Law | Estate Planning | About

Law Firm Website Design by
Amicus Creative