By Meg Abney
Cryptocurrencies like Bitcoin have gained popularity with investors for years, and around 16% of Americans now report that they have invested in or traded cryptocurrency (crypto). Most of these cryptocurrencies use decentralized networks based on blockchain technology—essentially a ledger that is enforced by a large network of computers.
However, the decentralization that makes crypto so popular also means that failure to plan for death or incapacity can prevent your loved ones from accessing your digital assets. Taking advantage of the blockchain now shouldn’t mean blocking loved ones from inheritance in the future. Read on for some estate-planning tips to help protect your assets.
What happens to my crypto when I die or become incapacitated?
Like funds in a bank account, cryptocurrency remains wherever it was stored, usually in a digital wallet or with a third-party holder. But unlike a bank account, your executor or agent under a Power of Attorney cannot simply request access to these funds upon your death or incapacity. Instead, you will need a method to provide your executor or agent with your keys and seed phrases. Failure to do so could mean that your loved ones never see these funds.
Can I just leave my crypto in a will?
Yes, but your executor will still need to gain access to it, and remember that your will becomes public record, so you should not include any sensitive information regarding your cryptocurrency. A simple way to communicate this information is by drafting a separate “access plan” that you keep with your will that describes your digital wallets, passwords, keys, and seed phrases.
What is the best way to plan for the future of my crypto?
While everyone’s situation is different, establishing a living trust is one of the best ways to ensure that your digital assets are not lost after your death. Some distinct advantages of establishing a trust for your cryptocurrency include:
With a living trust, you continue to maintain control over your cryptocurrency during your lifetime. After death, your successor trustee administers your trust according to your instructions. Setting up a trust involving cryptocurrency can be complicated, so it is best to consult with an experienced estate planning attorney. Please call Jesson & Rains if you have questions.
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