Strolling through the mall, you see vendors with signs stating “We now accept bitcoin.”
Digital currencies are a foreign language to many Americans, but are rising in popularity.
Digital currencies are known for their strong privacy and security measures, allowing users to stay anonymous and store their electronic currency. However, this privacy can cause potential complications in estate planning. Given the nature of this currency, it can be difficult or impossible to access these funds in the event of the incapacity or death of the owner.
Bitcoin is a currency that can only be accessed by its owner; it is stored in digital wallets that require a private key to access.
This can be a problem if nobody can access these assets after your incapacity or death. Consequently, is vitally important for you to: 1) Share your Bitcoin login and private keys information with your spouse and children; and 2) Hold your bitcoin in a non-commercial, private wallet, like a desktop or hardware wallet, so it will be easier for your loved ones to access after your incapacity or death.
To ensure that your digital currency holdings are passed down to the people you want, it is vital to prepare a detailed, written document with instructions on how to access your bitcoin and other digital currencies and securely store this document. Templates for this can be found online. If you use a template, be sure to print it out and fill it in. Most important, store it in paper form in a secure location, e.g., a safe deposit box, fireproof lockbox, etc.
If you are an owner of digital assets, how should you protect them?
Some solutions include inventorying your assets, creating security levels to allow for easier access to currencies, and, most important, updating your estate planning documents to plan for the protection and distribution of these assets in the future. By updating your estate plan to allow your agent, under a Power of Attorney, and your Trustee, under your living trust, to manage your digital currencies, you will reduce the risk of your currencies being forgotten or inaccessible.
If digital currencies are an investment you are considering, make sure you are taking the proper steps to protect those assets. Consult your estate planning attorney for any questions you have on how to manage and protect your digital currencies through your estate plan.