In the past few years, cryptocurrency has become a popular form of a financial investment as investors are finding high returns. With this increase in wealth, more people investing in cryptocurrency are seeking to pass these digital forms of currency (e.g., Bitcoin, Litecoin, Ethereum, Ripple, etc.) on to beneficiaries after their passing in a will. It is absolutely possible to include your cryptocurrency assets in a will, but it is not as straightforward as adding traditional assets to a will.
Cryptocurrency as an asset is quite different from traditional assets one might include in his or her estate plan or will. Traditional assets have a physical record of currency such as a bank account. For example, if you were to leave the fiat money in your bank account in your will to a beneficiary, it is typically required that the person handling your estate (your fiduciary) to produce an original death certificate and letters of testamentary in order to take control of the bank account once you’ve died. In the case of cryptocurrency, once you’ve passed, it is not required to show proof of death or power of attorney. Cryptocurrency requires the fiduciary to have the decedent’s passcodes to access and transfer the cryptocurrency account for estate administration purposes. It is essential that you trust who you name as your fiduciary because the fiduciary could use the cryptocurrency passcodes to access and manage your cryptocurrency account with very little oversight.
There are a number of steps you must take in order to leave cryptocurrency in your will that are much different than the steps you would take to leave traditional assets in your will.
Secure a tenured attorney who has the education and experience in incorporating cryptocurrency into estate plans and wills. Although cryptocurrency may be a new type of asset people want to protect and transfer after their death, there are experienced attorneys, such as the lawyers at Mile High Estate Planning, who can guide you through this process to ensure all of your traditional and crypto assets are secure and inherited by your loved ones.
List your cryptocurrency in your will. This may seem like an obvious step, however, if the crypto assets are not listed in the will, they can be subject to forfeit or residue (meaning the remainder or the aggregate of all of the probate assets of your estate) after your passing. It’s important to very clearly describe your cryptocurrency and where it can be found in your will.
A cryptocurrency investment does not simply mean owning digital currency like Bitcoin or Litecoin. In order to purchase cryptocurrency, you must register your bank account with a digital currency exchange (e.g., Coinbase, Gemini, Coinbase, Paxful, eToro, Revolut and Robinhood) that accepts ACH bank transfers. Once this is set up, through the exchange you can transfer fiat money using an ACH bank transfer to be able to buy cryptocurrency/digital currency like Bitcoin or Litecoin. Once you’ve purchased your digital currency it is not advisable to keep it in the exchange for a long period of time as it could be subject to a hack. Because cryptocurrency investors take the security of their digital assets very seriously, they often create digital wallets. Digital wallets may be kept on a computer, a smartphone app or a physical device. Common digital wallets are PayPal, Venmo, Google Pay, Android Pay, Samsung Pay, Alipay, Zelle and Apple Pay, just to name a few. It’s important to list all and any digital wallets in your will for your beneficiary’s eventual access.
When a will goes through probate it becomes public record. Since digital assets are only accessed through passcodes, passwords and PINs, for security purposes, this sensitive information should not be included in the will should the will go through probate. A memorandum is a separate document that is referenced in a will but is not part of the will or subject to public record. Memorandums can also be changed at any point in time. So, should you change access information to your digital assets, this can be changed in the memorandum without going through the legal requirements of changing a will.
It is advisable to create a memorandum that includes:
Once the memorandum is complete it can reside with the will or with your estate planning documents in a separate location.
Next, you will want to create a cryptocurrency access guide so that there is no confusion left to your beneficiaries. Cryptocurrency isn’t as common as a bank account; many people are unfamiliar or have never used digital currency. So, by leaving a detailed guide on how to access your wallets, exchanges and how to buy and sell cryptocurrency for fiat money, you allow for little guesswork on how to use and access your digital assets on your beneficiaries’ behalf after your passing. The guide can be updated at any point and included and stored with your memorandum.
If your beneficiary doesn’t want or know about cryptocurrency there are few options. For one, choose an executor of your estate who is tech-savvy enough to be able to exchange your cryptocurrency investment for fiat money. The executor of your estate can hire an estate administration attorney to do this exchange as well.
Second, you can place your digital assets into a trust. It is essential to hire an experienced estate planning law firm, such as Mile High Estate Planning, to ensure all of your digital assets are secure for when your beneficiaries have to access your investments. As an added layer of security, trusts are not subject to probate so your sensitive information will be kept out of public record until your beneficiaries access it.
When including cryptocurrency in your will, consult an estate planning lawyer to help. An experienced attorney, like the attorneys at Mile High Estate Planning, will make sure the provision will include:
There are a few key tips you need to know before and while you list cryptocurrency as an asset in your will:
Adding cryptocurrency as an asset to pass down to a beneficiary in your will is a delicate and technical job and is best to be accomplished by an attorney well-versed in different types of cryptocurrencies, digital wallets and exchanges, as well as estate planning and asset protection. This is where Mile High Estate Planning excels. With the technical education and experience on the cryptocurrency investment landscape and asset protection, Mile High Estate Planning can assist you in incorporating your cryptocurrency into your existing will or creating a new will with the digital financial assets and physical assets you would like to pass on. Contact us today and one of our tenured attorneys will guide you through the process.