How can cryptocurrency benefit me if I have an estate plan?
Cryptocurrency leaves no physical records, unlike a bank account. You must let an attorney or a trusted family member know about it, and have it disclosed in your estate planning documents
It is possible that to keep cryptocurrency a secret from your children until you pass on, unless you have declared it via your estate plan or told someone about it. Furthermore, your family would require your password and username to access your crypto account. If you save cryptocurrencies on a phone, thumb drive or hard drive, you can declare this in your estate planning documents, like a living trust.
It will be challenging for your loved ones to gain access to your crypto if you do not have an estate plan that lists out all the access information and states who gets what portion of your assets. The government cannot split crypto among your children. However, if it is possible to access your cryptocurrency, your crypto can be sold and the money gained from this sale can be split. Your estate plan document should state the details of your crypto assets, name of the beneficiaries and login details. This information will ensure that at least one person can have access to your crypto.
Estate planning is vital to ensure that your crypto can be passed on to your children. You can consider asking a lawyer to assist you in drafting a well-structured and detailed plan.
How can we include cryptocurrency in our wills?
To add cryptocurrency into your will is more challenging than you think. An attorney will provide tremendous help to make the will clear. These are some guidelines you can consider following:
Write a memorandum with passwords, passcodes, PINs and usernames. The memorandum should be referenced in the will but kept in a safe place, where someone you trust knows its location
Add cryptocurrency into your will, and list them as part of the assets that you want to disseminate, and state which section in the will contains the details of these crypto
Write a cryptocurrency access guide to help your heirs who may be unfamiliar with crypto
include all your digital wallets into your will
What will happen to crypto held in cold storage?
Crypto held in cold storage is stored in physical devices like USB drives, hard drives and phones. Cold storage ensures that your cryptocurrency will not be vulnerable to theft and cyberattacks.
The physical cold storage wallet can be left to a single beneficiary or distributed to several heirs through a will. Nevertheless, it is important to explicitly indicate any cold storage devices in your estate plan or will, because these devices can get lost easily. Once a cold storage wallet is lost, the crypto stored in it will be gone forever.
What happens if the beneficiary does not know or want to know about cryptocurrency?
Some beneficiaries do not want to continue trading in crypto. These beneficiaries might want to have their assets in cash, for instance. As you craft your estate plan, you can add a section on how to sell your crypto, and how to close the crypto account.
In general, there are two methods to sell crypto:
Selling peer-to-peer privately
Through an exchange service
Will cryptocurrency go through probate?
Cryptocurrency will go through probate if stated in a will, or if the individual passes on without a will. However, assets in a trust do not necessarily have to go through probate when you pass on. This means that crypto can be delegated to your heirs more quickly than assets disseminated through a will or probate. Probate proceedings for wills can go on for months, and your loved ones will have to go through the hassle of waiting this lengthy process out.
Can trusts hold cryptocurrency?
Trusts can indeed hold cryptocurrency. Nevertheless, you might have to identify who has access when the asset is transferred to the trust, and what the trust can do with it. The benefits of holding crypto in a trust are:
Lowers risks of getting scammed and hacked when held in Cold Storage
Ensures you do not lose your crypto after you pass on
Alleviates the stress that your beneficiaries will have when attempting to access and manage your crypto account
Keeps your crypto out of probate, which saves your loved ones time and money
Is cryptocurrency subject to estate tax?
Yes, cryptocurrency is subject to estate tax. This is because it is treated like other capital assets transferred over generations.
One way to avoid getting taxed for cryptocurrency is through gifting cryptocurrency. Crypto gifts are treated as regular gifts.
If you still have any questions regarding this topic, please feel free to reach out to me at 97901583!
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