Digital Currency Challenges Estate Planning

Cryptocurrencies bring high risk, along with the potential for substantial rewards.

Cryptocurrencies have become attractive to investors, despite the volatility of the market along with the flipside of high returns. However, that also brings a challenge to estate planning, according to the Financial Standard in “Crypto assets rewrite estate planning.”

One of the biggest problems is proving ownership of cryptocurrency. The way the technology works, each currency holder has a unique digital key. Possession of that key grants access to the account and there is no other proof of ownership.

Consequently, estate plans must be written so that the estate of a decedent account holder has access to the digital key, without inadvertently revealing the key to anyone else who could use it to gain unauthorized access to the account.

Another potential problem is simply the volatile nature of cryptocurrencies. Unless carefully considered in an estate plan, this can make it difficult to equalize inheritances between children. Without having an idea what the currencies might be worth at the time of death, one child could potentially have a much larger (or much smaller) inheritance than others.

An estate planning attorney can advise you on creating an estate plan that fits your unique circumstances and may include digital currencies.

Reference: Financial Standard (March 5, 2018) “Crypto assets rewrite estate planning.”