Globally, some 221 million clients have cryptocurrency accounts. Cryptocurrency is a type of virtual currency defined by the Commodities Futures Trading Commission as “a digital representation of value that functions as a medium of exchange, a unit of account, and/or a store of value.”
Cryptocurrencies use cryptography to validate and secure digitally recorded transactions on a distributed ledger, such as a blockchain. Blockchains house financial transactions without the intervention of banks, governments, or other third parties. Bitcoin, created in 2008 and first offered in 2009, is the market leader in cryptocurrencies, which today number in the thousands. A recent poll calculates 11% of Americans are cryptocurrency investors.
Real Ways to Bequeath Your Virtual Currencies
Estate planning is a must to ensure your digital assets are passed on to your beneficiaries. The following advice also applies to your accounts with PayPal, Venmo, and similar payment platforms.
Since cryptocurrencies exist digitally, account owners must provide clear instructions to their heirs describing how to access the accounts. Unlike banks or brokerage firms, where beneficiaries can present documents authorizing their right to a decedent’s account, no similar infrastructure exists in cryptocurrencies. Rather, heirs must have the proper username, password, and, in most cases, digital application. Without that information, the account is inaccessible.
As noted, usernames and passwords are key. Make sure the data is easily available: for example, you can leave an electronic note in a file on your computer (assuming your heirs have your computer password) or handwrite the information on a letter. Place the letter with your will and other important papers in a secure place, like a safe or a fire-proof box.
Other Options: Trusts or Liquidating Accounts
Where Do You Keep Your Digital Wallets?
Your beneficiaries may be unfamiliar with cryptocurrency – leave detailed instructions on how to use it. You might want to walk your loved ones through the process before you pass away so they have a better idea of digital access procedures.
Don’t List Passwords in Your Will
Real Taxes on Virtual Currency
Take Charge with the Help of Our Estate Planning Attorneys in Cary, NC
To combat crimes and money laundering, the U.S. Department of Justice launched a national cryptocurrency enforcement team in October 2021. Laws governing fiduciary access to digital assets are under discussion in many states. Talk to Carolina Family Estate Planning’s legal team about securing your estate’s cryptocurrency accounts for your beneficiaries. At Carolina Family Estate Planning, we help families build better lives by planning for a secure future via estate planning, asset protection, and long-term care planning. Call us today at 919-443-3035 to schedule a needs assessment call. We’re here to help.
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