Avoid a Digital Death for Cryptocurrency
Posted: October 6, 2022
By Stephany Hernandez, Law Clerk
Estate planning in today’s modern world requires planning for not only traditional assets but also digital assets. To properly plan it is important that you let your estate planning attorney know what digital assets you own.
What are Digital Assets?
Wisconsin statutes define digital assets as electronic records in which a person has a right or interest. This is a broad category that can include anything from online photo albums to cryptocurrency.
In this article, we focus on estate planning for cryptocurrency.
What is Cryptocurrency?
Cryptocurrency is a digital, decentralized form of currency. Bitcoin and Ethereum are two popular examples of cryptocurrencies.
Cryptocurrency transactions are tracked through a blockchain, which is an online open ledger that tracks all transactions. However, transactions are not attributed to a particular individual. Rather, they use private keys and seed phrases to track the transactions.
Why does this matter? At your passing, simply knowing your name will not gain your estate access to your accounts. Your agents must know where to locate your cryptocurrency and will need your seed phrase or private key/passwords in order to access these assets.
It is also possible to own cryptocurrency offline through the usage of cold wallet storages. These can take the form of USBs that are inconspicuous to your loved ones and thus could easily be discarded without someone knowing any better.
Inventory your Cryptocurrency
Take an assessment of the cryptocurrency you own and how you hold it. Do you utilize a popular exchange like Coinbase or Binance? Do you utilize a cold storage wallet?
It is very important that you keep track of your exchange accounts or the wallet itself and securely store your passwords. Once someone knows your private key or password, they can access your cryptocurrency.
How to Title Cryptocurrency
The titling of your cryptocurrency should be coordinated with your estate plan. Several options for titling cryptocurrency that you may want to discuss with your estate planning attorney include:
1. Title in your personal name – this may be the easiest option initially, but the most work upon your passing because personally titled assets typically require probate upon the owners’ death. Probate is a court supervised process that involves time, money, and lacks privacy.
2. Title in the name of a trust – many common cryptocurrency exchanges do not yet make it easy for trusts to buy cryptocurrency, but trust owned assets are typically easier to administer upon your passing because they avoid probate.
3. Title in the name of a Limited Liability Company (“LLC”) – depending upon the exchange you use it may also be possible to title your cryptocurrency in an LLC, which can also avoid probate if structured correctly.
It is also important that your estate planning documents include appropriate language to direct the disposition of your cryptocurrency and to allow your Trustees and other agents to appropriately manage such assets.
If you have not yet done so, discuss your digital assets with your estate planning attorney to coordinate these assets with the rest of your estate plan. Don’t overlook cryptocurrency or else it could be lost or misdirected.
If you have any questions, don’t hesitate to contact us.
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