Myth #1: If I want to keep my matters private, I have to keep my cryptocurrency a secret.
We understand that privacy is important. After witnessing the financial crash in 2008, it makes sense that a decentralized digital medium of exchange such as cryptocurrency would be popular since many have lost faith in the conventional banking system. However, do not let your desire for privacy create additional hardships for your loved ones.
If you pass away owning cryptocurrency that your loved ones can find and that you have not transferred to a trust, the cryptocurrency may be subject to probate. Probate is the court-supervised process of winding up a deceased person’s affairs. The trusted person who is selected by a judge or named in the will to wind up a deceased person’s affairs will have to prepare an inventory of everything the deceased person owned and file it with the court. Anyone may view this document if they have a few dollars and some free time to search for it. Therefore, not planning for your cryptocurrency could result in your affairs being public after your death. Probate can also be time consuming and costly.
In addition, if you choose to keep your ownership of cryptocurrency a secret from your loved ones, then no one will be able to access your keys or benefit from what you have invested in; it will essentially be lost. Your desire to keep matters private could deprive your loved ones of the benefits of your investment efforts.
Question #1: What information do I need to give my loved ones about my cryptocurrency?
To make sure that your trusted decision maker can access your cryptocurrency when the time comes, this individual (or group of individuals) needs to know what type of cryptocurrency you own. It is incredibly helpful if you can keep an up-to-date ledger of your holdings so your decision maker knows what to look for.
Next, you need to let your decision maker know how the keys are held. What type of wallet do you use? Do you use different types of wallets for different cryptocurrencies? You also need to let your decision maker know how to access the keys to the wallet or password for an account if you have your cryptocurrency stored on a third-party exchange.
Lastly, it is important that you let your loved ones know what your wishes are for your cryptocurrency. It is only by expressing your wishes in a legally binding document that we can help ensure that your plan will be carried out the way you want.
Question #2: Why should I work with an attorney to plan for my cryptocurrency?
Although there are many different options available to you when it comes to creating a plan for your cryptocurrency, working with an experienced estate planning attorney can help ensure that you have the right plan. First, it is important that you choose the right people to make decisions for you if you cannot make them for yourself or if you pass away. Because your estate plan will include managing cryptocurrency, it is important that your chosen financial decision maker be able to understand and confidently manage your cryptocurrency according to your wishes. This might require you to choose a person who is familiar with cryptocurrency instead of just a close friend.
Another reason for working with an experienced estate planning attorney is to ensure that your estate planning documents are prepared properly to carry out your goals and objectives for your cryptocurrency. Because cryptocurrency is new and volatile, some states may take the position that it is an unwise investment. The court may require that your trusted financial decision maker liquidate the cryptocurrency and invest it in something safer. This may not align with your wishes for your cryptocurrency. Therefore, if you want a trustee to hold on to the cryptocurrency and invest it on behalf of your loved ones or if you want to give your cryptocurrency to a named individual, you need to have your wishes written down in a legally enforceable document that contains the correct provisions to prevent its premature sale.