Putting physical assets like a car or a house into your will or estate plan is relatively simple. Adding financial assets like stocks and savings accounts can be a little more complicated. But what about cryptocurrencies like bitcoin?
Now that bitcoin is legal tender and its value is skyrocketing, more and more people will be owners of bitcoin and other cryptocurrencies, meaning those assets will need to find their way into a will or estate plan. Here are five of the most commonly asked questions when it comes to bitcoin and estate planning, along with some answers.
1. How Will My Heirs Know I Have Bitcoins?
Cryptocurrencies, by their very nature, are anonymous. And that’s one of the best reasons for making an estate plan — you want your heirs and your executor or trustee to be aware that your bitcoin exists. So you can either tell them now, or have your executor contact them after you pass, but either way, creating an estate plan that accounts for your bitcoin is essential.
2. How Can Heirs Access the Assets?
Again, one of the features of cryptocurrencies is their security. But what’s the point of bequeathing some bitcoin if your heir or executor can’t access it? And given the array of digital wallets, encryption, and backups that can be used to store and access bitcoin, writing a single password on a post-it likely won’t suffice. So make sure you have a plan for giving your heirs keys to your cryptocurrency kingdom.
3. What Should My Heirs Do With the Assets?
While cryptocurrencies are legal tender, they currently function a little differently than cash. For instance, if you bought $100 of bitcoin in 2011, you’d be sitting on about $4 million right now. So while you might want to hand down some of your virtual currency, you might not want your heirs cashing out immediately. An estate plan can separate your cryptocurrency assets into tiers depending on whether you want those assets easily spendable or view them more as long-term investments.
4. How Are Cryptocurrencies Taxed?
Just like any other financial asset, according to the IRS. Therefore capital gain and loss on property transactions, including virtual currencies, must be reported. And there may be estate taxes assessed on bitcoin gifts.
5. What Happens to Bitcoin If I Die Without a Will?
It goes, like your other property, to probate. Meaning courts will attempt to ascertain your heirs and bequeath your property for you. Probate can be a long, expensive process and, as we noted above, a court might not be aware of your virtual currency assets, meaning they never get passed on after you die.
So make sure your cryptocurrencies are part of your estate plan, and contact an experienced estate planning attorney for help.
Related Resources:
- Find Estate Planning Lawyers Near You (FindLaw’s Lawyer Directory)
- 5 Important Estate Planning Questions No One Likes to Answer (FindLaw’s Law and Daily Life)
- Time to Take Bitcoin Seriously? Bitcoin Tech Spreads to Wall St. (FindLaw’s In House)
- ‘Tis The Season for Estate Planning (FindLaw’s Law and Daily Life)
Source: Law