Cryptocurrency and Estate Planning
Bitcoin, Ethereum, and other cryptocurrency represent a growing share of global wealth. According to a survey conducted by the Pew Research Center, 16%of Americans state that they have purchased, traded, or used cryptocurrency. This raises an important question: How do you include cryptocurrency as part of your estate plan? The short answer is that the estate planning process is generally similar to other assets, but there are some specialized considerations that digital investors need to know. Here, our San Diego estate planning attorney provides a guide to cryptocurrency and estate planning in 2022.
Two Things to Know About Cryptocurrency and Estate Planning in California
1- You Can Control What Happens to Your Cryptocurrency Holdings
First and foremost, it is important to emphasize that you retain full control over what happens to your cryptocurrency holdings. With a well-structured estate plan, you can design who gets to inherit what. In this way, cryptocurrencies are similar to other financial assets. Indeed, the Internal Revenue Service (IRS) views digital currencies as a form of property. Depending on your specific circumstances, you could pass on your cryptocurrency to beneficiaries using:
- A will;
- A trust; or
- A combination of both.
2- Access is More Challenging—Make Sure Your Heirs Know What to Do
While the law regarding cryptocurrencies is similar to other financial assets, there are also some very important differences. Investors in digital currencies face some unique challenges. They need to make sure that their loved ones have a basic understanding of how cryptocurrencies work—otherwise a close family member or friend may not even be able to access your valuable cryptocurrency assets. Here are two specific issues to keep in mind:
- Cryptocurrency is Largely Anonymous: There is no direct personal information associated with Bitcoin or other cryptocurrency. If information regarding the existence of your cryptocurrency holdings is not shared—either with your loved one or an estate planning lawyer—they may not even be able to track it down. It could simply get lost.
- Cryptocurrency Access Generally Requires a Private Key: Beyond knowing what and where cryptocurrency is, your loved ones need access to the proper keys. Without the keys, they could effectively be locked out of your cryptocurrency forever. This remains a major issue in the industry. As The New York Times reported earlier this year, several people have been locked out of millions in Bitcoin because they lost their private keys.
If Bitcoin or other cryptocurrencies are an important part of your financial holdings, it is crucial that you work with an estate planning attorney who can help you put the proper legal structure in place so that you and your heirs will be able to access that capital—no matter what tomorrow brings.
Get Help With Estate Planning in San Diego and La Jolla
At The Law Office of Kris Mukherji, our San Diego estate planning attorney has the skills, experience, and professional expertise that you can count on. If you have any specific questions about cryptocurrency and estate planning, we are more than ready to help. Contact our firm today for a completely confidential consultation. With an office in La Jolla, we provide estate planning representation in San Diego and throughout the wider region.