May 31, 2022
How Does Cryptocurrency Fit into My Estate Plan? | Estate Planning Attorney
Bitcoin, Ethereum, Dogecoin, and the like have become popular digital currencies, and you may have acquired some along with your other assets. However, your use of cryptocurrency could impact your estate plan. Essentially, if you don’t include a plan to access your crypto in your will or trust, your surviving beneficiaries could face challenges gaining access to the funds.
Difference Between Virtual Currency and Traditional Assets
The Internal Revenue Service (IRS) considers virtual currency, such as Ripple, Bitcoin, and Ethereum, personal property. That means you can list your cryptocurrency as an asset while drafting your estate plan. You should also consider its effect on tax liability if you leave it to your heirs.
Your virtual currency can disappear if no one knows about it. It’s different than other types of assets, such as bank accounts, which nearly everyone has. Your designated beneficiaries may not be aware that you own cryptocurrency, and they can’t access something they don’t know exists.
If you leave the funds in your checking account to your child, they can call the bank or financial institution for access. Accessing cryptocurrency is a bit more complex. Your chosen beneficiary must know about it and have the access keys to receive it.
Additionally, the appreciation or depreciation of your virtual currencies can significantly affect your estate plan. Your beneficiaries are responsible for taxable gains based on the value of the currency at the time of your death.
How to Include Cryptocurrencies in an Estate Plan
While creating your estate plan, you should consider the best method of leaving behind your cryptocurrency. Again, you can only access it with an access key, which is a series of characters like a password for an online account.
Including this key in your last will and testament could give anyone access because the document becomes a matter of public record. Someone could look up the information online and steal the funds your family was supposed to receive.
It’s also important to note that if your Executor or Trustee loses your key or forgets where you decided to store it, there isn’t a way to recover the information. This fact may also impact how you leave instructions behind for accessing the funds.
The bottom line is that if you own cryptocurrency, you need to talk to your attorney about incorporating it into your estate plan. If you need help getting started, our team is here to guide you through the process so that your family receives all of the assets they rightfully deserve. To schedule a consultation with a Michigan estate planning attorney at our law firm, contact 844.885.4200.
About Castle Wealth Group
Contact Castle Wealth Group for all your estate planning needs. We build a perfect strategy for your retirement, including income planning, investment planning, tax planning, health care planning, and legacy planning. Visit our website or call us at 844.885.4200 or email us for your financial advice.
Join our Weekly Wisdom Webinars
Estate Attorney and Advisor Chris Berry of Castle Wealth Group answers questions on retirement and estate planning every Wednesday at 1pm www.wisdomwebinar.com to register or give our office a call at 844-885-4200.