What You Should Know About Cryptocurrency and Estate Planning
Estate planning has been thrown for a loop when it comes to figuring out the best way to negotiate crypto-assets alongside traditional assets and holdings. While cryptocurrency can be arranged into estate planning, securing digital assets falls outside of a typical will.
For those who are just beginning to enter these murky waters, it’s important to find out how to reconcile crypto-assets in the estate planning process and which pitfalls to avoid.
Understanding the Concerns With Crypto
Like in typical estate planning, digital assets will need to be divided among beneficiaries and distributed by an executor or a trustee. However, the primary stumbling block in the process has become how to locate and transfer the necessary information to access digital accounts. Unlike a will, there is no template for managing cryptocurrency after death, and keeping the digital information private is of utmost importance.
Documenting and Establishing Who Has Access
While there is no unified form to direct crypto allocation in the estate planning process, the options have become more streamlined. The most important aspect is to make sure that any crypto-assets have been clearly documented in the estate plans and that someone, somewhere, will have access to the seed phrases and private keys necessary for access and distribution.
As it stands, digital-asset custody services are available and equipped to hold seed phrases or private keys necessary to access crypto accounts. Ownership is not easily transferred in self-sovereign assets, and, as such, the custody of the keys for safekeeping relies on specific guidelines for release.
Placing Crypto in a Trust
Placing crypto in a trust can help shield it from estate taxes while keeping access keys safe and secure. For example, suppose clients are unsure that other family members or executor services are proficient enough to access and evaluate the digital assets. In that case, financial advisors can be named as trustees.
Naming beneficiaries in a traditional will can be risky unless the signer has explicitly communicated plans. Many beneficiaries with access to parts of the seed phrase can make distribution difficult to negotiate if tensions are high.
Guiding Clients on Wallets
The current guidance is for users to appoint trustees, advisors, or trusted family members to be two out of a three-part multi-signature wallet rather than the self-sovereign option. Then, when the account holder is no longer available, the two other keyholders will be able to access the necessary information with their signatures alone.
We Can Help With Cryptocurrency Estate Planning
Cryptocurrency can be a great addition to your legacy strategy, but you must know to ensure it is passed on. Our experienced cryptocurrency estate planning attorneys can help you navigate through the process. Contact us today for a consultation.