Do you have cryptocurrency or NFTs? They must be included in your estate plan

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Cryptocurrencies and non-fungible tokens (NFTs) are becoming increasingly important in the investment world as more and more people buy these assets. It’s important to factor these digital assets into your estate plan so that they pass on to your loved ones upon death, just like more traditional assets. Crypto and NFTs, however, can present challenges in securing, transferring, protecting and donating family wealth. New strategies are evolving to meet this growing demand for family planning and tax planning with these types of assets.

There are currently many different cryptocurrencies and NFTs. Currently, the major cryptocurrencies are Bitcoin, Ethereum, Binance Coin, Tether, and Solana, and they account for a large portion of the trillion-dollar market value. An NFT is a unique, collectible and tradable digital asset on the blockchain, much like digital art, a photo or a video game avatar, which can only be purchased on an NFT marketplace through a call process. of offers. For example, you can buy virtual land and real estate in the form of NFTs. In November 2021, someone paid $450,000 to be Snoop Dogg’s neighbor in the Metaverse. NFT sales jumped to over $17 billion in 2021, demonstrating a growing desire for these collectibles.

Track your cryptocurrency and NFTs

Cryptocurrency is accessed via a private key, which is a series of alphanumeric characters known only to the owner and stored in a digital wallet or in cold storage. Anyone who has the private key can buy, sell and use the digital currency. Your family or trustee needs to know that cryptocurrency exists, where to find the assets, and what to do with them. One option is to share the seed phrase and private keys with your trustee. Another option for secure tracking is to place your crypto-assets and NFTs in custody, such as a software application or hardware wallet. Companies offering digital asset custody services include Coinbase, BlockFi, Casa, Unchained Capital, Anchorage, and Genesis. A third, more old-fashioned option is to schedule your digital assets for your trustee and list the login protocols for each account on the cryptocurrency exchange you use.

Similarly, NFTs can only be accessed with a password or personal key. Like cryptography, your passcode or personal key must be shared with your fiduciary for it to be transmitted. A digital heirloom (an organized, up-to-date list of your digital assets and the relevant information and passwords a trustee will need to access them) can be a good place to keep this information.

Ultimately, you must ensure that details of NFT and cryptocurrency ownership, including private keys and passwords to access digital wallets, are accessible to the fiduciary – otherwise, the crypto- currency and NFTs could be lost forever.

Cryptocurrency, NFT and your estate plan

It is currently difficult to open cryptocurrency accounts and NFTs in the name of a revocable or irrevocable trust. However, there are wallets that allow you to open an account in the name of a trust, or you can try naming a trust as the beneficiary of your account. This option is only available if the company managing your account allows it. At the time of this article, our clients have generally failed to name beneficiaries of crypto accounts. It is likely that the ability to name a beneficiary will evolve quickly and may soon be available.

If there is no trust account or named beneficiary, your crypto accounts will become part of your probate estate under your will. You should ensure that your will, trust, and enduring power of attorney include powers over digital assets for the trustee managing your estate. It is also important to know whether your state has enacted the Uniform Fiduciary Access to Digital Assets Act (UFADAA) or the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA). Of the 50 states, 46 have passed one of these two laws. UFADAA and RUFADAA make it easier for loved ones to manage your digital assets during incapacity and after death.

Conclusion

Estate planning and tax issues surrounding NFTs and cryptocurrency are complex and continue to evolve. In future articles, we will discuss the tax issues surrounding these assets, as well as some planning techniques.

Partner and Group Chairman of Trusts and Estates, Mirick O’Connell

Real estate lawyer Tracy Craig is a partner and chairman of Mirick O’Connell’s Trusts and Estates group. She focuses on estate planning, estate administration, prenuptial agreements, tax-exempt organizations, guardianships and curatorships and elder law. Craig is a Fellow of the American College of Trust and Estate Counsel and AEP®. She received an AV® Preeminent Peer Review rating from Martindale-Hubbell, the highest rating available for legal capacity and professional ethics.

Trusts and Estates Lawyer, Mirick O’Connell

Emily Parker Beekman is a partner in the Trusts and Estates group at Mirick O’Connell. His practice focuses on estate planning, estate and trust administration and tax planning. Emily also specializes in disability estate planning, guardianship and guardianship issues, long term care planning and other elder law issues.

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