With thousands of different types currently available and explosive growth in popularity and circulation, cryptocurrency is quickly becoming an important part of the modern-day estate plan. Cryptocurrency is digital currency that can be used as a system of exchange to purchase goods and services. One of the biggest draws to cryptocurrency in recent years has been its use of blockchain technology to record and manage transactions. A blockchain is essentially a digital ledger of encrypted transactions that is duplicated and distributed across the entire network of computer systems on the blockchain. The innovation with a blockchain is that it guarantees the reliability and security of this digital ledger and generates trust without the need for a centralized trusted third party.
Cryptocurrency is typically owned in one of two ways, either through an account with a cryptocurrency exchange or held in a “wallet” with an encrypted private key. A cryptocurrency exchange account is similar to a traditional brokerage or investment account in that a custodian, such as Robinhood or Coinbase, holds and maintains the owner’s account. However, unlike a traditional brokerage or investment account, most cryptocurrency exchanges do not allow for typical beneficiary designations or ownership of the account by a trust or business entity. Additionally, submitting the owner’s estate to a traditional probate administration will generally ensure that the account is not lost upon the owner’s death.
Cryptocurrency assets can also be held in a “wallet” that is accessible by the use of an encrypted private key, sometimes as long as 64 digits, that is unique to the owner. Wallets offer greater anonymity and more control over your assets because they are “non-custodial.” However, the risk associated with using a “wallet” is that if the private key is lost or forgotten, such as at the death of the owner, the assets are lost forever without a method for recovery.
Due to the lack of oversight and inherent risks associated with cryptocurrency, it is imperative that your cryptocurrency assets are addressed in your estate plan. Whether the assets are held in a cryptocurrency exchange account or in a wallet, it is important to include step-by-step guide detailing that the crypto account exists, where to find it, and how to access it. Depending on the individual client needs, trusts can be a great way to ensure that your loved ones do not lose access to your cryptocurrency assets at your death. Further, as a result of the complexity in preparing and detailing an estate plan to handle your cryptocurrency assets, it is highly recommended to use an estate planning attorney with experience in dealing with cryptocurrency.
Our team focuses on strategies to preserve your assets and ensure that your loved ones are not forgotten after you pass. If you would like to know more about updating your estate plan to address your cryptocurrency assets, contact the Harris Beach Wills, Trusts & Estates Practice Group to discuss options that may be available to you. Our Wills, Trusts and Estates attorneys practice across New York state in our Albany, Buffalo, Ithaca, Long Island, New York City, Rochester, Syracuse and White Plains offices.
This alert is not a substitute for advice of counsel on specific legal issues.
Harris Beach has offices throughout New York state, including Albany, Buffalo, Ithaca, New York City, Rochester, Saratoga Springs, Syracuse, Uniondale and White Plains, as well as Washington D.C., New Haven, Connecticut and Newark, New Jersey.