Woman on tablet assessing non-fungible tokens

Traditional estate planning typically involves established investments like stocks, real estate, and gold. In the past few years, cryptocurrencies like Bitcoin and Ethereum have soared in popularity and have started playing a more prominent role in investment portfolios. And even more recently, Non-Fungible Tokens (NFTs) have emerged as a highly versatile form of crypto asset. We discussed estate planning for Bitcoin and other cryptocurrencies in a previous article. 

What exactly are NFTs, and should North Carolina residents invest in this new type of crypto asset? Jackie Bedard, founding attorney of Carolina Family Estate Planning in Cary, North Carolina, answers these questions.

How Do NFTs Work?

NFTs, or non-fungible tokens, are unique, non-interchangeable data units that form part of a blockchain (usually Ethereum). Unlike crypto currencies such as Bitcoin, where one cryptocurrency unit is worth the same as any other, an NFT is always associated with an exclusive, irreplaceable digital property item like a photo, video, or audio file. An NFT owner holds a certificate of authenticity in a digital ledger.

Popular NFT marketplaces include Rarible, OpenSea, and SuperRare. The NFT-hosting blockchain keeps a record of all NFT transactions.

It’s important to note that while an NFT certificate proves ownership of a unique and original digital item, it does not restrict copying or sharing the underlying file. Think of it as artwork reproduction: while almost anyone can distribute Van Gogh poster prints, only one entity owns the original painting.

What to Keep In Mind When Investing in NFTs

To date, the most expensive NFT ever sold is a digital collage by Beeple titled Everydays: The First 5,000 Days. A cryptocurrency investor from Singapore paid over $69 million for that digital artwork at Christie’s in March 2021. This transaction sparked a wider recognition of and interest in NFTs.

How valuable may NFTs become in the future? So far, it appears too early to tell. At this point, the market value of NFTs is highly volatile, similar to Bitcoin and other cryptocurrencies. Investors should be cautious when pouring real, hard-earned money into digital tokens with unstable worth.

NFT investors often purchase non-fungible tokens in hopes that their value may go up so that, in time, they can sell their NFTs for a profit. However, it is next to impossible to predict whether the worth of a specific digital item will appreciate or depreciate. Furthermore, the NFT market is poorly regulated and subject to frequent scams.

NFTs and Estate Planning

In addition to secure trading in digital artwork and other collectible digital items, NFTs may offer advanced solutions to estate planners. Physical asset authentication is one potential future use for NFTs. Potentially, any physical item – including real estate property – could link to a unique digital token verifying its authenticity.

Theoretically, in the future, NFTs could function as a secure method of title ownership transfer, will storage, and safeguarding important documents.

An important question is the tax status of NFTs. Purchasing, selling, or trading NFTs may involve capital gains or losses. An up-to-date estate planning attorney can advise you on the tax aspects of NFT investment or refer you to relevant tax professionals.

Protecting NFT Investments

Have you heard stories of unlucky crypto investors who lost cryptocurrency deposits worth millions of dollars simply by mislaying their private key? Like cryptocurrency investors, NFT owners should protect and securely transfer their private ownership keys.

Every NFT investor should have at least one trustworthy person who knows that they own one or more NFTs and can retrieve any necessary passwords and private keys to access the digital ledger holding non-fungible tokens. Without that information, the owners or family members could lose a valuable NFT forever.

Further, you should discuss your NFT investments with an estate planning attorney that understands NFTs and can help incorporate a strategy for transferring your NFTs as part of your estate plan as well as protecting your NFTs, including appropriate measures to prevent fraud or “bad actors” from using your private keys to steal the crypto assets.

Why You Need an Estate Attorney

Whether or not you plan to invest in novel forms of digital property, you need an experienced estate attorney. Devising a comprehensive estate plan can help protect your assets and secure your family’s future.

A knowledgeable estate attorney can:

  • Protect your retirement accounts
  • Help you create a strategy to minimize estate or inheritance taxes
  • Guide you on proper utilization of all relevant tax exemptions
  • Help you create legal documents related to wills, trusts, and power of attorney
  • Find ways for your designated beneficiaries to avoid the probate process

If you’re looking for an estate planning lawyer, you’ve come to the right place. At Carolina Family Estate Planning, we employ a personalized, down-to-earth estate planning approach. We help clients make intelligent decisions about their future and protect their life legacy by working with them to create an all-inclusive estate plan.

Carolina Family Estate Planning: Your Estate Planning Attorney in Cary, North Carolina

Founder and attorney Jackie Bedard and the experienced legal team at Carolina Family Estate Planning can help you create a comprehensive estate plan, from solid asset protection to long-term care planning. 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.


Copyright © 2022. Carolina Family Estate Planning. All rights reserved.

The information in this blog post (“post”) is provided for general informational purposes only and may not reflect the current law in your jurisdiction. No information in this post should be construed as legal advice from the individual author or the law firm, nor is it intended to be a substitute for legal counsel on any subject matter. No reader of this post should act or refrain from acting based on any information included in or accessible through this post without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in the recipient’s state, country or other appropriate licensing jurisdiction.

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