Cryptocurrency has gained ground as a new asset class and captured the attention of investors worldwide. As its popularity increases, more and more investors and individuals are considering adding digital currencies to their long-term investment plans and are seeking ways to allocate them in their estate plans.
It’s natural, then, to wonder if these assets can fit into an estate plan at all. For investors, the good news is that they can. Keep reading, and we’ll explain the basics of cryptocurrency, its tax implications, and how you can include it in your estate plan.
Understanding Cryptocurrency
Cryptocurrency is a virtual or digital currency that uses cryptographic technology for security purposes. Bitcoin, Litecoin, Ethereum, and Ripple are some of the most popular digital currencies in the market.
The decentralized nature of cryptocurrency allows for a secure and quick transaction without the need for a third party. Unlike traditional currencies, digital currencies are not governed by any central authority, making them highly volatile.
The Tax Implications of Cryptocurrency
The tax laws around cryptocurrency are still ambiguous and vary from country to country. In the United States, the Internal Revenue Agency (IRS) treats cryptocurrency as property for tax purposes.
The tax implications for cryptocurrency include capital gains or losses, income generated from mining, and various other tax treatments depending on the type of transaction. It’s crucial to understand these tax implications before including cryptocurrency in your estate plan.
Including Cryptocurrency in Estate Planning
Because digital currencies are not governed by any central authority, they can be challenging to manage and transfer after death. Unless you take care to prepare for the transfer of digital assets specifically, your loved ones may not be able to benefit from them.
For this reason, it’s vital to include cryptocurrency in your estate plan to ensure a smooth transfer of your assets to your heirs. One option is to appoint a trusted executor to manage the digital assets and transfer them to the beneficiaries. Another option is to store the private keys in a safe deposit box or other secure location and add them as valuable assets to your will.
Setting Up a Cryptocurrency Trust
Another way to include cryptocurrency in your estate plan is to establish a cryptocurrency trust. A trust allows you to appoint a trustee to manage your digital assets and distribute them to the beneficiaries according to your wishes. This can help protect digital assets from theft or mismanagement and ensure they are transferred in a timely and effective manner.
Seek Professional Legal Assistance
While including cryptocurrency in your estate plan is possible, it’s essential to seek the help of a professional. An experienced tax attorney or estate planner can help you navigate through the intricate legal process and ensure your assets are protected. They can help you with tax implications and incorporate cryptocurrency into your estate plan.
We at Nguyen Lawn Group can provide the legal support you need to ensure you have a secure estate plan. Despite the volatility of intangible cryptocurrencies, we have the estate planning experience necessary to help you devise a plan that can ensure all of your assets are transferred to your loved ones after your death.
If you wish to speak with an experienced estate planning attorney about your needs, contact us today and request a consultation.