Cryptocurrency has emerged as a new medium of exchange that provides security and ease of transaction with no government intermediaries. Considered a Digital Asset, it is easy to pass on your Cryptocurrency accounts and funds to your family following your demise or incapacitation.
There are many ways to do this, you can tell your trusted family members about your crypto accounts, write down details of your crypto accounts and wallets and store them somewhere safe, or include them in your Will or create a Trust for them.
The goals to plan for passing on your Crypto Assets are:
- Easy access and transfer of your funds and accounts to your family members.
- Avoiding disputes among your cryptocurrency heirs.
- Minimizing the risk of theft before the funds are accessed and controlled by your family members.
Digital Assets are different from regular assets and so are the ways to plan for their future. You certainly don’t want the world to know about your cryptocurrency account details after you pass away, in other words, you need to avoid Probate.
What is Probate?
Probate is a legal term for the process of authenticating and validating a Will. It’s a long procedure that can cost your grieving loved ones a year or more for accessing your assets after you pass away. Mentally draining, the process can cost your family members a great amount of money.
The process of Probate is equally applicable even if you don’t leave a Will before death and your assets will be distributed according to the state laws. With the volatility of Cryptocurrency, it is not worth taking the risk to wait for months or years for your family to access your accounts and wallets.
During Probate, the Will of the deceased person is filed in the court and becomes a public document. If your Will contains information related to your crypto accounts, then hackers can bat an eye on them. The goal of minimizing theft risk before fund transfer to the beneficiaries cannot be achieved with the presence of Probate.
Why Use Trust To Avoid Probate?
Creating a Trust is the best way to avoid Probate for your Cryptocurrency. A Trust is a legal arrangement where a Settlor or Trustor gives the control of the assets to a Trustee for the benefit of the Beneficiary(third-party). Living Trusts are becoming popular because they can be modified while the Trustor is alive. A Living Trust is made by transferring some assets into the trust which could be handled by the Trustor acting as a Trustee while alive. After the demise of the Trustor, the trust could do the following:
- Instruct the trustee about either the distribution of assets among the beneficiaries or continue managing the trust assets to benefit the beneficiaries.
- Reduce the paperwork, inheritance, and estate taxes.
- Immediate access to the assets(avoiding Probate), saving time, money and protecting the mental well-being of the family members.
- With Trust, probate slides out of the scene and this ensures that details of your Crypto Assets will remain private(out of the public records).
You might also be interested in reading:
You can start with a Trust for your Crypto Assets by keeping simple points in mind:
Mention your Cryptocurrency accounts, Wallets, and Exchanges in the Trust documents.
Create a list containing passwords and devices you use to access accounts.
Make a guide stating all the technical steps for your beneficiaries to access your Cryptocurrency accounts.
A Trust can solve many problems related to passing on your Crypto Assets. It is only smart to protect all your Digital Assets along with cryptocurrency through a Digital Estate Plan which provides a smooth transfer of these assets to your family after you pass away or become incapacitated.