Estate Planning in the Age of Cryptocurrency
Bitcoin and digital assets are adding another dimension to estate planning in Arizona. Most estate planning is based on the idea that it will be easy to find, value, and distribute financial assets. That isn’t always the case with the evolving field of cryptocurrency — which has cuaght many estate planning practitioners off guard. At Yaser Ali Law, we are constantly working to keep abreast of the latest financial technologies and what the owners of the assets must now do to make sure the funds go their heirs and not others.
Recommended steps for elder care and estate planning involving cryptocurrency
As with all financial assets; you should identify what your bitcoin and digital assets are, where they are, how you acquired them, and how they can be sold.
You should review your assets with an attorney who understands the various types of cryptocurrency. Digital currency includes more than just bitcoins. Some of the more popular “altcoins” include:
Each of these coins can be stored in online exhanges, digital wallets, or locally on your computer or smartphone with various access methods which greatly complicates the process of identifying them for heirs. Some considerations our Tempe Arizona estate planning lawyers will review with you regarding your cryptocurrency assets:
- Determine where the identity of the assets and the access mechanisms will be stored. The attractiveness of bitcoin and other digital currencies is that they don’t have specific beneficiaries nor specific places, like banks, where they are kept. An executor can’t just write a letter to a bitcoin company and ask for the funds. If you are preparing a will, you need to make clear how they currencies can be accessed after you die. Access should be safe and secure. A safe deposit box may be a good place to store the identity and access information.
- Analyze if it’s best to keep or sell the digital currency. You need to understand which currency may be worth keeping (providing the legal documents don’t force it to be sold immediately), and which ones should be sold right away. The right of a personal representative to invest the currencies or manage them instead of selling may be subject to the Uniform Prudent Investor Act, Arizona laws, or new federal laws. If you want your executor to hold on to digital currencies, you should review the preference with your Tempe cryptocurrency estate planning lawyer. That attorney should make that clear which provisions you need to include in your will.
- Understand the tax consequences. Anyone who owns cryptocurrency needs to understand how the IRS and Arizona will value bitcoins and other currencies when you die. Currently, the IRS treats virtual currency as personal property – more like a car or jewelry than cash. It’s not considered income or cash until it’s sold. Your Arizona estate attorney will also review with you what the tax basis of your cryptocurrency is worth at the time of your death. If the value increases after death, your personal representative or beneficiary may be required to pay fiduciary income taxes or personal income taxes.
- Explain the access methods. Understand how your personal representative or beneficiaries can access your cryptocurrencies. To access digital funds usually means have access to logins, passwords, and to the technical means to access the money.
Contact a trusted Arizona estate lawyer today
At Yaser Ali Law, our Tempe estate planning attorneys review all your financial assets, the needs of your family, and your wishes for your loved ones after you’re gone. Our firm keeps current with the latest issues and trends that can affect the creation of a will or whether a modification of a will is necessary.TO fully understand your rights and options, please phone us at (480)-442-4175 or complete our contact form to schedule an appointment.