It’s still hard to say what will happen with bitcoin and other cryptocurrency. This trendy digital currency has been in the news the last few years. While it got a lot of media attention, and it saw incredible increases in value, eventually the market came crashing down. Now it’s difficult to predict how significant cryptocurrency will be in five to ten years. Whether or not bitcoin becomes the currency of the future as its supporters hope, bitcoins have value. Anything of value is an asset and it’s useful to know how they are handled in estate planning. Though this is still a new field, experienced estate planning attorneys know strategies to use when integrating bitcoin into an estate plan.
What is Bitcoin?
Bitcoin is a digital currency that can be converted to real currencies (US dollars, euros). Bitcoins exist as incredibly complex, encrypted code that is generated by computers. You can transfer real currency to an owner of a bitcoin, and they make a transfer of the code to your bitcoin wallet. Each end of the process is protected by its own private key and address. All bitcoin exchanges are publicly recorded, which brings transparency to the system, but the system only records transactions. There is no way to track the senders and receivers of bitcoins, which makes it problematic for government agencies dealing with money laundering and illegal trades.
Though it is called a virtual currency, there are few companies that accept bitcoin outright. Instead it must be converted into traditional currency. That is why people consider it as a commodity and why the IRS considers bitcoin as property for now.
Bitcoin and Estate Planning
Bitcoins like other digital assets are included in the owner’s estate, and if you’d like to distribute your bitcoins to a specific person, that should be arranged in a trust or a will. Bitcoins were designed to give users total anonymity and security, so unless you share the details with your family or financial advisors, it is next to impossible for your inheritors to access your bitcoins. There is no bank that they can call or visit. It is important that you inform others about your cryptocurrency investments and provide them with the details to access them after you’ve passed away. Cryptocurrency doesn’t function like other types of currencies, and if you decide to invest in bitcoin, you will need to make sure that your estate planning properly accounts for these differences.
Consult with the estate planning experts at Clear Counsel Law Group to learn more about assets and asset transfers. See to it that your family and loved ones are properly supported after you pass away by reaching out today.