Cryptocurrencies and Estate Planning: How to protect these intangible assets.
Bitcoin is a digital currency and payment system invented by Satoshi Nakamoto, an unknown person or group of people, in 2008. Bitcoins are created as a reward for a process known as mining. This cryptocurrency can be exchanged for other currencies, products, and services. More than 100,000 businesses and vendors worldwide have begun accepting bitcoin.
Bitcoin has been criticized for its ties to illicit trade, bitcoin thefts from exchanges, energy usage, price volatility, and the potential for bitcoin to be a speculative bubble. Bitcoin has also been acquired as a financial instrument, although several regulatory bodies have issued investor warnings about bitcoin.
If you own bitcoin or other cryptocurrencies, it's important to think about how you will assign them in your estate planning. Unfortunately, there is no clear-cut answer when it comes to estate planning for cryptocurrencies. However, there are a few options that you can consider.
Assigning Cryptocurrencies by Will
One option is to include cryptocurrencies in your will. You can list out each individual bitcoin or cryptocurrency that you own, and assign it to a specific beneficiary. This choice could be advantageous because it provides clear direction to your beneficiaries on what to do with your cryptocurrencies. However, it can also be challenging to keep your will up-to-date if the value of your bitcoin or other cryptocurrencies fluctuates significantly, which they often do.
A will is a legal document, and as such is often contested by beneficiaries or other interested parties. If there are disputes about your cryptocurrencies after you die, the court may have to decide how they are distributed. This could lead to a long and costly legal battle. Additionally, if you die without a will, your cryptocurrencies will be distributed according to state law. This could lead to them being auctioned off or divided among your heirs in an unpredictable way.
Assigning Cryptocurrencies in a Living Trust
Another option is to assign your cryptocurrencies to a living trust. This can be done by adding a provision to your trust agreement that specifically designates how and when your cryptocurrencies will be distributed. Like including cryptocurrencies in your will, this choice has the advantage of providing clear direction to your beneficiaries. However, a living trust does not go through probate court and is, therefore, less likely to be challenged.
A trust is a legal arrangement in which someone holds property or assets for the benefit of another person. The person who sets up the trust is called the grantor, and the person who benefits from the trust is called the beneficiary. Trusts can be used for a variety of purposes, including holding property, managing finances, and distributing assets after death.
Bitcoin and other cryptocurrencies are often held in trusts since they can be difficult to manage and transfer without a central authority. When setting up a trust, the grantor must specify how the assets will be managed and distributed. The terms of the trust are typically set out in a written document called a trust deed or trust agreement. Once the terms of the trust have been established, they cannot be changed without the consent of all the parties involved.
Choose the Right Attorney
It's important to remember that trusts are not just for wealthy people. In fact, anyone can set up a trust, regardless of their income or net worth. There are a variety of different types of trusts, each with its own advantages and disadvantages. The type of trust that is most appropriate for you will depend on your specific needs and circumstances.
As with any estate planning decision, it's important to consult with an attorney who is familiar with estate planning and cryptocurrencies. Your attorney can help you weigh the pros and cons of each option and create a plan that best suits your needs. You can visit HunkinLaw.com to schedule a consultation for your wealth planning needs.