An estate plan is essential if you are serious about ensuring your intended heirs actually receive your assets once you have passed away. However, many people end up forgetting to take digital assets into consideration when designing their estate plan. This can be particularly problematic if you have significant amounts of cryptocurrency that you would like your heirs to have access to. The following are some options you may want to consider in order to ensure proper distribution of your cryptocurrency.
Include cryptocurrency holdings in your will
It is important to list your cryptocurrency holdings in your will otherwise it is possible that nobody will even know to look for them. Your physical assets and belongings, even if you forget to list them in the will, is more obvious and apparent. However, this is not so much the case when it comes to cryptocurrency.
Draft a memorandum to your will
You should consider listing your various digital wallets and accounts at online cryptocurrency exchanges in a memorandum to your will. Provide the specific location along with necessary passwords for accessing your cryptocurrency wallets and accounts. Understand that the memorandum is not actually a part of your will but is referenced by your will which means the sensitive information will not be public. It also means you will be able to amend the memorandum without having to change the will.
Keep your cryptocurrency in a trust
Another option aside from utilizing a will is to use a trust strategy when creating an estate plan that includes cryptocurrency holdings. By putting your cryptocurrency in your trust, you are giving the trustee the responsibility of managing your cryptocurrency stored in digital wallets and exchanges. If you hire a trust company to be your fiduciary, make sure the company is equipped for and knowledgeable about how to deal with distributing cryptocurrency to beneficiaries.
Create a cryptocurrency guide
Not everybody has the knowledge or is tech savvy enough to be able to properly manage cryptocurrency holdings. Therefore, you may want to create a short guide which shows your beneficiaries the important details on how to manage the cryptocurrency they have inherited. This guide should include how to access your digital wallets and accounts on exchanges.
Try to keep the guide as straightforward and simple as possible. Your beneficiaries should easily be able to follow the instructions step-by-step in order to access the cryptocurrency inheritance. It is probably even a good idea to go through the instructions yourself to verify you have included all the necessary information and details.
Choosing your strategy and implementation
Choosing either a will or trust will depend on more than your cryptocurrency holdings, but also requires you to consider your overall estate planning goals and financial situation. Many times, an experienced wealth management advisor can help you more clearly understand your options. The financial advisor will also be able to help you navigate the process of implementing your chosen estate planning strategy.
The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of the author and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.
Prior to making an investment decision, please consult with your financial advisor about your individual situation. The prominent underlying risk of using bitcoin as a medium of exchange is that it is not authorized or regulated by any central bank. Bitcoin issuers are not registered with the SEC, and the bitcoin marketplace is currently unregulated. Bitcoin and other cryptocurrencies are a very speculative investment and involves a high degree of risk. Investors must have the financial ability, sophistication/experience and willingness to bear the risks of an investment, and a potential total loss of their investment.