2021 brought exponential growth in the popularity of digital assets such as cryptocurrencies and non-fungible tokens. With more investors holding these nascent assets, personal finance site/magazine Kiplinger noted that they could become part of an estate plan.
One of the first things to address with cryptocurrency is security. It’s one of the main reasons regulators like the Securities Exchange Commission (SEC) view cryptocurrencies with a dubious eye, especially with hacks on public exchanges that leave retail investors prone to theft.
As such, keeping track of cryptocurrencies or other digital assets should be first and foremost when integrating them into an estate plan. A digital wallet or a cold storage offers alternatives for storage outside a public exchange to minimize the exposure to hacking.
It is also necessary to give a private key to the executor or assigned fiduciary of an estate who will eventually be in charge of the management of assets in an estate.
“Whoever has the private key can buy, sell and use the digital currency,” noted Kiplinger. “Your family or fiduciary must know that the cryptocurrency exists, where to find the assets, and what to do with them.”
The use of wallets will also be beneficial when dealing with trusts, which are arrangements where a fiduciary is assigned to manage assets. While it might be difficult to open a crypto account under the name of the trust, there is where wallets can also once again be beneficial.
“However, wallets do exist that allow you to open an account in the name of a trust, or you can try to name a trust as a beneficiary of your account,” Kiplinger said. “This option is only available if the company handling your account allows it.”
The Laws Regarding Crypto Are Still Fluid
As mentioned, digital assets are still in their nascent stages of development despite the recent explosion in popularity. As such, laws regarding the handling of digital assets concerning estate planning are fluid and constantly changing.
“You should make sure that your will, trust, and durable power of attorney include digital asset powers for the fiduciary handling your estate,” Kiplinger noted. “It is also important to know if your state has adopted either the Uniform Fiduciary Access to Digital Assets Act (UFADAA) or the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA).”
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