Most of the news about cryptocurrency in the last few months, has been about how volatile and risky it can be as an investment. However, there are many people who are making a lot of money off of the many different forms of cryptocurrency now available.
The very nature of how these currencies are held by their owners, creates issues in estate planning. Why? Proof of ownership is nothing more than possession of a digital key. Anyone who has the key, can access the cryptocurrency.
This obviously means that it is not a good idea to write the key down in a will that could be made public during the probate process. However, there are other problems as the New Jersey Law Journal reports in "Estate Planning in the Age of Cryptocurrency."
One of the biggest issues is taxation. Despite having "currency" in its name, cryptocurrencies are not treated as currency for tax purposes. They are instead treated as property. This has important implications for how these assets should be treated in an estate plan, to minimize any taxes that must be paid by the estate or potential heirs.
Another issue is how the cryptocurrency should be transferred. Owners need to decide whether it should be given to heirs as cryptocurrency or whether it should be sold and given to heirs at its cash value.
Consulting experienced financial and legal counsel is essential, when navigating these largely uncharted waters.
If you would like more estate planning information, visit our website www.MoTrustLaw.com and subscribe to our complimentary e-newsletter.
Reference: New Jersey Law Journal (April 23, 2018) "Estate Planning in the Age of Cryptocurrency."