The Basics of Cryptocurrency and How to Leave it in Your Will the Right Way
Author: Patrick Hicks, Head of Legal with Trust & Will
Cryptocurrency is a relatively new phenomenon and as such, leaving cryptocurrency in a will is somewhat uncharted territory. If you’re one of many who have purchased Bitcoin, Ethereum, Binance and the like, you might be wondering how you should work it into your estate plan. Know that simply gifting bitcoin isn’t effective. You also have to make sure that your beneficiaries will know how to find and access the cryptocurrency you bequeathed to them.
What is Cryptocurrency?
Cryptocurrency is a class of digital money that is protected by blockchain technology. Blockchain is a decentralized system that stores financial transaction data in such a way that can’t be changed, hacked, or cheated. Cryptocurrency is independent from any type of central bank or governance.
This independence and security are elements that have made cryptocurrency immensely popular. Although it can be used today to facilitate some internet transactions, most individuals are investing in it for the future. There is much speculation that one day, cryptocurrency will become mainstream and thus more valuable.
Types of Cryptocurrency
According to Investopedia.com, there are currently over 4,000 different cryptocurrencies in existence. Although other forms of crypto have risen in popularity, Bitcoin has held its position as pack leader for a long time. Any other currencies are often referred to as “altcoins.”
Here are some of today’s most popular cryptocurrencies:
Bitcoin (CRYPTO: BTC)
Ethereum (CRYPTO: ETH)
Binance Coin (CRYPTO: BNB)
Cardano (CRYPTO: ADA)
Difference Between Cryptocurrency and Traditional Money or Assets
Unlike traditional money, cryptocurrency has no physical manifestation. It’s an asset that can only be used in the digital space. For security reasons, cryptocurrency can’t be accessed unless you hold the private key, which is typically stored in a digital wallet.
Cryptocurrency can be included as a part of an estate plan along with other assets such as money, property, and personal belongings. However, because of its secure nature, gifting bitcoin or an altcoin requires extra steps.
For example, the transfer of real estate merely requires some paperwork and making sure your beneficiary can get a copy of the key. However, when bequeathing cryptocurrency, you need to find a way for your beneficiary to locate and access your private key without giving up your security.
What Happens to Cryptocurrency When You Die?
Without its private key, there is no way to access a crypto asset. That means that if you die without leaving a way for someone to locate and access the private key, your cryptocurrency will essentially be lost in the digital ether. Although the asset will remain in your possession, and your private will remain a part of the cryptography, it will be lost and inaccessible. That’s why adding cryptocurrency into your estate plan matters.
The Revised Uniform Fiduciary Access to Digital Assets Act, more easily referred to as RUFADAA, is a law that provides the Executor of an Estate, digital fiduciary or an attorney, with access to someone’s online accounts after death or incapacitation. While most states have passed a RUFADAA law, the definition of what qualifies as a digital asset or electronic communication varies state to state. That’s why it’s so important to leave behind clear instructions regarding your digital assets in your estate plan.
Why Adding Cryptocurrency into your Estate Plan Matters
Including any cryptocurrency you own into your estate plan, such as a Will or Trust, is the only surefire way to ensure your beneficiaries will have access. This holds true for any other type of digital asset as well.
By using your estate plan, you will provide the legal right and necessary instructions so that your cryptocurrency…