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By Ryan Conklin, Wright & Moore Law Co., LPA
If you follow financial news, investment trends, or emerging markets, you have probably heard of Bitcoin, Ethereum, Doge Coin, and other cryptocurrencies. Cryptocurrency, or crypto for short, is a new system of currency that is based entirely on the internet and is not tied to a central bank or a particular government. In the last few years, crypto emerged as a darling of the investment world, with some currencies increasing in value by thousands of percentage points.
Crypto is maintained in a digital ledger that is highly secure, rigorous to acquire, and very difficult to access by unauthorized parties. The owner of an online crypto wallet is the only party who can access and manage those currencies. With such a valuable asset, and one that is regularly appreciating, estate planning for crypto owners present special challenges.
Estate planning steps
The first and most important step is the crpyto owner providing a trail of bread crumbs for a fiduciary to find. As with other assets, if someone doesn’t know an asset exists, it is difficult to make a plan for it.
Next, after an attorney is made aware of the cryptocurrency, he or she can adapt the estate plan accordingly. A crypto wallet requires a unique alphanumeric key for access, and these wallets typically do not rely on personally identifiable information like address or social security number. A crpyto owner should make the private key readily available to an estate planner.
Generally speaking, simple estate plan documents will struggle with a complex asset like cryptocurrency. If you elect to use a will-based plan, the valuation of your cryptocurrency or the private key may become public record. Similar to other assets like land, the probate process could tie up crypto in months of court proceedings. Best to avoid these hurdles with a proper estate plan.
A trust-based plan makes the most sense for dealing with a digital asset like cryptocurrency. Trusts provide maximum flexibility in drafting the plan, can offer complete privacy, and may allow for a seamless transition of the asset. Trusts also provide the best vehicle for managing estate tax issues that can arise if your crypto portfolio is substantial.
While a growing digital wallet can be a healthy addition to your investments, your estate plan should adapt to this new class of asset. If you, a friend, or a family member is mining cryptocurrency, make sure they implement an estate plan that can capture that value and pass it to his or her heirs. As always, seek legal counsel if additional guidance is needed.
Wright & Moore Law Co., LPA has a rich heritage in Ohio agriculture. Since 1988, our firm has proudly assisted farmers, rural residents, and landowners from all over the state with their farm succession planning and agricultural legal needs. We would be happy to discuss your family goals and how to meet them. To learn more about Wright & Moore or schedule a meeting, call 740-990-0750 or visit OhioFarmLaw.com.
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