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Estate Planning for Cryptoassets

If you have cryptoassets, such as cryptocurrency (i.e., Bitcoin) or nonfungible tokens, it is critical to make sure that your estate plan is up to date.  Without doing so, your appointed Executor, Trustee or agent under a Power of Attorney could not only have trouble accessing those assets, but they may not even know they exist, leaving what may be a significant asset unclaimed or inaccessible.

The problem with cryptoassets is, quite simply, that they do not exist in physical form and all transactions are performed with a computer.  The blockchain, as described in a previous newsletter article, is a ledger that records cryptoasset transactions and keeps track of the cryptoassets in circulation.  These assets are then managed through control of a combination of public keys and private keys.  Public keys are like email addresses.  If you have the email address, you can send an email to that address.  If you have a public key, you can send a digital asset to the digital wallet associated with that key.  A private key is generated from a binary computer code that must commonly uses a series of human-readable words (the “seed phrase”) that, when entered into a compatible wallet device in a specific order, constructs and controls the private keys that can access the cryptoassets in the blockchain.  If you have control over the private key, you can have control over the underlying assets.

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While it is somewhat straightforward for an executor, trustee or agent to gain access to information regarding a decedent or principal’s bank accounts or physical assets like real estate, it is often difficult for these fiduciaries to gain access to digital assets, assuming they even know they exist in the first place.  Not only do existing laws limit access to digital assets, but some make it a crime to do so.  Couple that with the laws that impose on fiduciaries certain standards of care when it comes to managing investments, your fiduciaries may find themselves in precarious positions that they were not expecting.

 Fortunately, most of these issues can be resolved with a carefully drafted estate plan.  If you own cryptoassets, it is very important to make sure they are specifically disposed of in your Will or Trust.  It is equally important to refer to and leave behind written instructions explaining the step-by-step process for accessing and using the cryptoassets.  It is also important to make sure specific language is included in your documents to give your appointed fiduciaries access to these digital accounts and instructions regarding whether they can continue to hold cryptoassets in your portfolio.

Another important consideration to discuss with your estate planning attorney is how to avoid the costs of probate by transferring cryptoassets to a trust.  Some of the options here include sending virtual currency to your trustee’s online wallet account, transfer the private key to a secure physical device, transfer the device to the trustee and document the transfer, use a hardware wallet instead of an online wallet account and assign it to the trust’s name, or fund an LLC with cryptocurrency and transfer the LLC interest to a trust.


ASK ANYA

Hook Law Center: Is it possible for an indoor cat to get fleas?

Anya: Unfortunately, I have learned from personal experience that it is possible.  Even if a cat never ventures outdoors, fleas can still find her by traveling indoors on another pet or on one of their humans, or by lurking at the vet’s office or the groomer’s or even a new home.  If you do find fleas on your indoor cat, talk to your vet about treatment options, use a flea comb to remove as many fleas as possible and vacuum frequently to remove fleas and their eggs from carpets and floors, making sure to take the canister or dust bag outside immediately.

Posted in Senior Law News