Digital assets have been around for quite some time, but they seem to be dominating headlines again this year. In part, you can thank high-profile figures such as Elon Musk for promoting cryptocurrency, or music artist Grimes for selling $6 million in NFTs.
What’s clear to me is there’s a new wave of people who are making significant money by trading digital assets. What’s not clear to me is whether these individuals will be prepared to pass on these digital assets in future years. Don’t let your assets be inaccessible if anything unexpected were to happen to you.
What Is Cryptocurrency, And Why Has It Been So Popular?
Cryptocurrency is a digital currency that can be used to buy online goods and services. Part of cryptocurrency’s appeal is the technology that backs it. Blockchain is a decentralized system that records and manages transactions across many computers and boasts that it’s very secure.
As of June 24, the total value of all cryptocurrencies was $1.35 trillion, according to CoinMarketCap. There are many cryptocurrencies out there, but the most popular ones include Bitcoin, Ethereum, Binance Coin and now Dogecoin.
What Is An NFT?
NFTs are another digital asset class quickly gaining popularity. NFT stands for non-fungible token, which means each is one of a kind. They’re supported by blockchain technology and can be anything digital, such as artwork or music files. Right now, NFTs are mostly being used as a way to buy and sell digital art. For example, an artist could sell their original digital artwork to a buyer. The buyer is the owner of the exclusive original, while the artist might retain proprietary rights to feature the artwork or make copies of it (however, any copy won’t be the original.) The popularity of NFTs is centered around the social value of fine art collecting in the digital space.
Three Reasons To Have An Estate Plan If You Buy Bitcoin
1. Not subjecting your loved ones to probate. Even if your loved ones knew you had cryptocurrency accounts, and even if they knew where you stored your password, that wouldn’t be enough for them to get access to your accounts. Without a proper estate plan, your digital assets may be put through a lengthy, expensive and legally tenuous probate process.
2. Blockchain technology. Another major consideration for creating an estate plan for your cryptocurrency and NFTs is blockchain technology. You need a private key to access each of your assets, typically in the form of a long passcode. A solid estate plan that includes that information can help you have peace of mind knowing that your investments can be passed on to loved ones if anything were to happen to you unexpectedly.
3. Decentralization. Cryptocurrency is decentralized by design. Central banks are removed from the process, and it’s secure because its processing and recording are spread across many different computers. The flip side of this decentralized system: There is no governing body overseeing the affairs of cryptocurrency. Laws will likely take decades to catch up, so right now, it’s like the Wild West. Because the laws surrounding cryptocurrency are complicated, and in some cases nonexistent, it’s important that you take the security of your investments into your own hands.
As someone who already appreciates technology, you’ll find there is a new generation of online estate planning platforms that can help you set up a trust or will. These agencies are pivoting quickly to bring digital assets to the mix.
Put Your Plan In Place
For cryptocurrency, I recommend including a step-by-step guide explaining to your loved ones how to access your assets. Because it’s so complicated, it’s also best practice to include instructions for your executor to hire an estate attorney who has experience dealing with cryptocurrency.
Read more related articles at:
Estate Planning with Cryptocurrency
What Holding Crypto Means for Your Estate Plan
Also, read one of our previous Blogs at:
What Assets Should Be Included in Your Trust?
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Click here for a short informative video from our own Attorney Bill O’Leary.
