Cryptocurrency (or ‘crypto,’ for short) is a form of digital currency that is used either for trading, or to purchase products and services from digital stores. Bitcoin was the first crypto, and is by far the most valuable and popular. Crypto is favored because it is secure (private and encrypted, two-party exchanges), decentralized (free of government and third-party control), less expensive (lower transaction fees vs. traditional banking), and efficient (sustainable, expeditious transactions).
A non-fungible token (or ‘NFT’) is a digital asset that is representative of physical items, like art, videos, gaming elements, and music. ‘Non-fungible’ means that these assets are unique, and are often considered priceless due to the fact that they cannot be replicated or replaced, allowing buyers exclusive access to a one-of-a-kind asset. The most expensive NFT sold to a single owner was a piece of digital art created by the artist, ‘Beeple.’ This piece of art sold for $69M.
Why Crypto and NFTs Need to be Included in Your Estate Plan
As these digital assets become more widely adopted—and more valuable—it’s essential to include them in your estate plan. Not including these assets in your will or trust could lead to major impediments for the loved ones responsible for settling your estate. There are many horror stories of people amassing millions of dollars in crypto and NFTs, only to pass away without leaving instructions for how to access them. Luckily, there are some steps you can take now to ensure your digital assets don’t get lost in the abyss of cyberspace after you’re gone.
1. Decide which estate planning instruments to use
While NFTs and cryptocurrencies can be included in a will, you might consider placing these assets in a trust, instead, to protect them from creditors, estate taxes, divorce, and probate.
2. Take inventory
Due to the anonymity of these assets—and because there are no deeds or other paperwork for your estate executor to present—keeping a detailed inventory of these assets is paramount. Most important are your login credentials, access keys, and the physical devices used to access your assets.
3. Secure your accounts
Use a password manager to frequently change your passwords and access keys; streamlining all of your passwords in one convenient place.
Include specific language in your will to grant executors and beneficiaries access to your crypto and NFT accounts and passwords, in order to avoid state and federal law violations.
Consider using a digital asset bank to hold your assets. These online platforms keep track of your inventory and its value, and can also provide insurance for your assets.
4. Decide how you want these assets to be managed and distributed
Considering the complexities that surround access to your assets, it’s important to appoint an executor and/or a trustee to ensure they are distributed in the manner you wish them to be.
Key to the success of this is ensuring you deeply trust those appointed to the role, and that they are well-informed on their responsibilities.
5. Revise your current estate planning documents
If your estate planning documents are 10 years or older, it is likely that they don’t include provisions related to digital assets and should be updated to include them immediately.
When revising a plan that has already been established, it is vital to be certain that your trustee, personal representative, or financial agent has the power and authority to both access and manage your digital assets.
Cryptocurrency and NFTs are still a relatively new concept, so it’s understandable that you may have questions as to how they fit into your estate plan. These types of assets are evolving at a rapid rate, and laws regarding them are adapting at the same break-neck pace. Enlisting the expert help of an estate planner who is well-versed in the nuances of creating an estate plan for these types of unique assets will ensure your estate plan is kept up-to-date and accurately reflects these vacillating changes.
Get in touch with us below to begin planning for your digital assets today.