You might be surprised to learn that digital assets and estate planning are becoming increasingly important considerations. In recent months, cryptocurrency has continued to live up to its reputation for being an intensely volatile market: recently losing more than $2 million in value in a matter of months.
And yet, CNBC reports that crypto market and bitcoin enthusiasts expect a revival. Given that U.S. households own over one-third of the global crypto market, that’s good news.
While according to experts the crypto crisis is far from over, on the other hand, digital assets like cryptocurrency are here to stay.
Digital assets have commercial value. Which is why we all need to understand something about them —what they are and how they fit into your estate plan.
You may be aware that bitcoin came into existence in 2008. However, since then, thousands of new digital assets —including coins, tokens, currency, and non-fungible tokens (NFTs) have also come into existence. And more are emerging all the time.
The cryptocurrency ecosystems are ever-changing and fast-growing. Keeping up with it is a challenge at best.
So here are 3 factors you should know about digital assets and estate planning.
3 Factors You Should Know About Digital Assets and Estate Planning
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We now have a definition of digital assets
The term “digital assets” covers a broad array of assets that are in digital form. The term refers generally to anything that is created and stored digitally, is identifiable and discoverable, and has or provides value – regardless of the technology used to create it.
Digital assets can include, for example, photos, manuscripts, documents, or data. But they can also be assets created on the blockchain technology, such as non-fungible tokens (NFTs), cryptocurrency, or tokenized assets.
In recognition of the dramatic growth and increasing importance that digital assets have had on our society and the fact that digital technology will continue to grow and change in the future, on March 9, 2022, President Joe Biden issued an Executive Order on Ensuring Responsible Development of Digital Assets (the Order), setting policy for advancing digital blockchain technology for financial services and defining “digital assets.”
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Transferring digital assets is a challenge but it can be done.
For purposes of estate planning, having digital assets poses a significant problem.
Digital money and cryptocurrency transactions are recorded in secure digital ledgers known as blockchains. The blockchain is a very secure system that makes it nearly impossible for someone other than the owner of the cryptocurrency to transfer it.
Because of this, it can be difficult to pass on digital assets like cryptocurrency to your heirs. Transferring digital assets at the time of death requires knowing how the asset is held (whether in a “cold wallet” or “hot wallet”) in addition to being able to identify the assets you own.
Working with an experienced estate and probate attorney well in advance of the need for the transfer of such assets can go far towards making sure that your digital assets can be passed down to your heirs.
3. Not everyone wants to be a trustee for digital assets – choose your trustee with care.
A third factor regarding your estate plan and digital assets (and cryptocurrency in particular) that you should be aware of, is that it is possible to administer these assets through a trust. Of course, it needs to be set up properly and in a way that ensures that the private keys are kept private but can be accessed by the trustee at the appropriate time.
But not everyone is comfortable handling or being responsible for digital assets. In other words, not all trustees who might be willing to serve as a trustee for your family trust are willing to serve if there are digital assets involved. To be fair, this is new technology and it is a complicated area. So, you need to be extra careful about choosing a trustee if you have digital assets as part of your estate. Choose a person or company that has the experience and expertise to properly handle these assets.
Digital Assets and Estate Planning – Get the Help You Need
As trusted probate and estate planning lawyers, we serve individuals and families in the vibrant communities of Plantation, Fort Lauderdale, Boca Raton, West Palm Beach, and Miami, FL. We are also pleased to offer the options of both in-person and virtual appointments throughout Florida to make our services accessible no matter where you are located.
If you want to discuss your specific situations with one of our estate planning lawyers, do not hesitate to reach out to our law firm at 954-580-3690. You can also fill out our contact form.