Digital Assets and Estate Planning: Adapting to the Evolving Landscape

In the world of estate planning, ensuring that all your assets are comprehensively included in your revocable living trust is paramount. Traditional trust documents typically cover tangible assets like bank accounts, retirement funds, and real estate. However, there's a growing need to consider the inclusion of digital assets, particularly cryptocurrencies, which are often overlooked in standard estate planning.

Cryptocurrency: The Unseen Wealth

The rise of cryptocurrencies has introduced a new asset class that's both volatile and decentralized. Unlike traditional banking systems, there's no central authority like a “Bank of Bitcoin,” making the management of these assets unique and challenging, especially in the context of estate planning.

For those holding cryptocurrencies, it's crucial to consider how these assets will be managed and accessed posthumously. Trusts and wills can include cryptocurrency just as they would any bank account, but the process for trustees and executors is more complex.

Handling Cryptocurrency in Estate Plans

Access to cryptocurrency is fundamentally different from accessing funds in a bank. Crypto wallets don’t operate with standard "pay-on-death" policies, meaning trustees or executors need direct access to the wallets, which includes passwords and PINs. If your designated trustee isn't familiar with cryptocurrency, educating them about the basics is essential to prevent loss.

An estimated 25% of Bitcoin has been lost due to forgotten passwords or misplaced external wallets. Inaccessibility equals worthlessness in the crypto world. Therefore, your estate plan should include clear instructions and access details for your digital currency holdings.

Planning for Your Digital Legacy

When creating an estate plan, provide your attorney with a detailed list of all your cryptocurrency assets. Regular updates to this list are crucial, especially for active traders. Any changes in wallet keys should also be reflected in your estate documents.

Be aware of international laws governing crypto trading, as they may impact the management of your digital assets. Some U.S. states are adapting their laws to allow executors to manage digital assets similarly to traditional ones. However, due to the volatile nature of cryptocurrencies, some executors may prefer to liquidate these assets quickly.

For crypto traders, the best approach is to work with an estate planner experienced in digital assets. This ensures that your digital wealth is properly managed and transferred to your beneficiaries, maintaining its intended value.

Our Firm Can Help

As digital assets like cryptocurrencies become more prevalent, integrating them into your estate planning is not just prudent, it's essential. It’s crucial that families and individuals that own these assets work with a qualified estate planning attorney to ensure they are passed down to their loved ones and not lost forever. We can help! Start by booking a Peace of Mind Planning Session, In this 1-hour session, we’ll discuss your options for protecting all your digital assets. Mention this article and we will waive the $350 session fee. Book today! HERE is the link.