Cryptocurrency, often referred to as crypto, is a form of digital currency. Instead of being managed by a centralized authority (like a bank), crypto transactions live on an immutable public ledger called a blockchain and are independently verified by a network of computers.
Since crypto assets are decentralized, it’s extremely important that you include them in your estate plan. Be sure to select an executor you trust to execute that plan. Otherwise, it may be impossible for your beneficiaries to secure access to these assets when you pass away.
Cryptocurrency is growing in popularity and like other valuable assets you can obtain over your lifetime, you need to plan to pass this asset on. Cryptocurrency is considered a probate asset, which means it must go through the legal process of distributing your estate before it can be legally transferred to your beneficiaries after you die. Creating a thorough estate plan makes the probate process quicker and easier for everyone involved.
An important thing to note is the most popular crypto exchanges don’t currently support any type of beneficiary designation for crypto assets such as transfer on death (TOD) or payable on death (POD) accounts, known as common ways to keep traditional assets out of probate.
Due to the decentralized nature of cryptocurrency, there are security concerns when it comes to protecting this unique digital asset. Crypto is a digital currency and akin to physical assets with value, like cash, precious metals, or gemstones. Anyone who gains access to your crypto can use it, similar to someone gaining access to your bank account. Except, crypto is not backed by an authority, which means once the currency is taken from you, it will not be recovered. This brings forth a major issue if you die without giving someone access to your crypto keys — the strings of randomly generated numbers and letters that serve as your crypto “passwords” — your cryptocurrency is likely gone forever, locked in a digital wallet that can’t be accessed. This makes it imperative to create a thorough and clear plan with instructions for your executor to follow.
These are some important tips to follow when passing on your cryptocurrency. First, name a beneficiary for crypto assets in your estate plan. Make sure to list all your crypto assets in your estate plan, where they’re stored, and who should receive them. In addition to naming beneficiaries, you should also name an executor, the person you appoint to administer your last will and testament. You can also name an exclusive digital executor who is in charge of all your digital assets. It is best to name an executor who is already familiar with cryptocurrency.