Do you own cryptocurrency? Bitcoin, Litecoin, Ethereum, Ripple, Stellar? What will happen to these assets when you pass away? With more and more people dipping their toes into cryptocurrency ownership, it is important to discuss these assets with your estate planning attorney and financial advisor to ensure your estate and financial plan address the ownership.
Cryptocurrencies present an interesting problem for estate planners because the ownership of cryptocurrencies are individualized instead of institutionalized. As an example, if someone holds cash in a bank account and they die, the bank will limit access to that account until someone presents them with the proper documentation of the death and accompanying legal documents. The legal documents need to either be a small estate affidavit, Letters of Administration from the appropriate Probate Court, or Trust Certification. Owning a cryptocurrency does not offer these institutional protections. Cryptocurrency is much more like keeping the money in a safe in your house. Cryptocurrency is held in an online wallet that only requires a key to open. Much like a safe, if you have the key, you have full access to the funds.
There are benefits and dangers to this type of ownership. A benefit is that the funds can be released almost immediately if a fiduciary has access to the key, which can provide cash to pay for a decedent’s final expenses. However, if the fiduciary trusted with the key turns out to be a wrongdoer, there is little to no recourse to recover the funds.
Another way that institutionalized funds can transfer upon death is to establish a death beneficiary on the account. Beneficiary designations like this are also common with life insurance policies and retirement accounts. There are no such provisions for cryptocurrency accounts.
Because cryptocurrency accounts are unique to the individual, it is crucial the fiduciary (whether executor or trustee) have access to the necessary information to access the account. It is also crucial that the will or trust for the owner of the cryptocurrency includes language that allows the fiduciary to access the digital and/or online accounts for the decedent.
