If you got in on the cryptocurrency phenomenon early, you may have a nice chunk of change saved up. Of course, because of the nature of these “cryptoassets” or digital assets, if you’re the only one who knows how to access them, they’ll essentially die with you.
That’s why, assuming that you want your loved ones or others to get these assets when you’re gone, it’s essential to include them in your estate plan. However, that’s more complicated than naming a beneficiary on your retirement account or leaving your bank accounts to a family member in your will.
One attorney who’s written about cryptoasset inheritance planning says that you need to share all the information required to access these assets with the people who need to have it. That includes “the kinds of assets, key locations, and access controls you’re using for security.” She recommends listing all of this information and putting it in two different secure locations where your heirs and executor can find it.
She suggests using good old-fashioned paper for at least one of these copies rather than a USB drive that could fail. If you buy and sell assets regularly and are always investing in new types of cryptocurrency, it’s essential to keep this list current.
You need to do more than leave your loved ones a list of your digital assets. If you want to help your family avoid estate battles and legal issues, it’s essential to include language about these assets in your estate plan. Fortunately, most states, including Arizona, have laws on the books that make it easier to include them in estate plans.
Ironically, perhaps, the Internal Revenue Service (IRS) considers cryptocurrency to be property instead of currency. That means it’s taxed at its fair market value on the date the owner died. One attorney who has helped draft legislation regarding these assets, says, “Typically, executors will want to sell crypto property quickly, so they won’t be criticized for holding it if the virtual assets drop in value.”
If you have bitcoin or and/or other cryptocurrencies, be sure to tell your Arizona estate planning attorney so that you can follow the appropriate procedures for leaving these assets to your heirs or other beneficiaries. Your attorney can also provide guidance on any changes to the law that may occur before your estate plan is administered.