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Cryptocurrency and Trust

Creating a trust is an important part of estate planning that ensures your assets transfer over smoothly to your beneficiaries.               

If you have considerable assets in the form of cryptocurrency, you may be wondering how best to pass those assets on to your loved ones. An Orange County trust attorney can help you ensure that your trust includes cryptocurrency.

How Does Cryptocurrency Work?

Cryptocurrency is a form of digital currency that is known for its security. There are several types of currency, and they work similarly to tokens.

Cryptocurrency is generally stored in a wallet, which exists at an “address” used to exchange currency. To access the wallet and take currency out, you’ll need a private key. This currency storage method is vastly different from how banks work, and many crypto users appreciate the extra security.

Another unique feature of cryptocurrency is its anonymity. While transactions can be traced, your crypto address is entirely anonymous and provides a good deal of privacy.

When it comes to estate planning, however, you’ll need to take a few extra steps to ensure that your crypto accounts will be accessible to your beneficiaries in the future.

How Do You Put a Cryptocurrency in a Will?

For most bank accounts and financial assets, mentioning them in your will or including them in a trust is enough to ensure they will go to the designated beneficiaries.

Because cryptocurrency is different from traditional assets, you’ll need to be deliberate when including it in your estate plan.

The first step is to mention its existence in your will, so that your loved ones will know to look for it. Otherwise, the lack of a paper trail could cause them to overlook those assets entirely.

You’ll also need to instruct them on how to locate your crypto wallet, such as the application and type of wallet you use. An attorney can help you with phrasing and choosing the most pertinent information to include in your will. 

Since wills are a matter of public record, you’ll need to avoid putting sensitive information in the will itself. A memorandum or other document can include the details of your wallet address and key so that the information stays private among your beneficiaries and trustees.

How Will My Executor Or Trustee Be Able To Access My Cryptocurrency?

Cryptocurrency has several unique advantages, but most laws weren’t written with them in mind. You’ll need to provide access to your trustee yourself in order for them to be able to access your crypto wallet.

Without your express permission, your trustee likely won’t be able to access your wallet at all. There’s no way to reset the key or request access in court. It’s important that your trustee be able to access it in order to take important actions such as transferring it or providing access to beneficiaries.

An Orange County estate planning attorney can help you determine a secure but accessible way to share sensitive information with your trustee. One such way is by encrypting the information and storing it on a flash drive or other form of digital storage.

Your documents should include a list of your wallets and where to find them, whether on an app, hosted online, or somewhere else. You should also include your usernames, passwords, and keys used to gain access to those wallets and accounts.

When you’re thorough and fully cover your bases, your attorney and trustee will make it easy for you to include cryptocurrency in your trust.

Can You Hold Cryptocurrency In A Trust?

It’s possible to hold almost any form of property in a trust, and many trusts even include digital property. Cryptocurrency falls into the category of personal property, and it can be placed into a trust. However, there are a few key issues to keep in mind if you plan on adding a crypto account to your trust.

It may depend in part on the policy of banks or other entities that function as trustees. Some of your prospective trustees may not handle crypto, so make sure to ask banks, lawyers, and other potential candidates as you choose your fiduciary.

You’ll also need to make important decisions on what to include in the terms of your trust. For example, some grantors give their trustees authority over their accounts for investment purposes.

It’s important that your trustee have easy access to your wallet, so that they can pass on this information to your beneficiaries when necessary.

The contents of a trust are private, so you can include details about the location of your wallet and its address. It’s possible to keep your key encrypted or save in another, more private location as long as it’s accessible when it becomes necessary.

-keep good records for tax reasons. When your assets transfer to the beneficiaries, they’ll need to know certain details, like the value of your crypto. They’ll be able to look at your records and answer tax questions quickly. 

What Are the Benefits of Holding Crypto in a Trust?

A trust allows a legal entity to hold your assets on your behalf, and there are several benefits to doing so. Depending on the type of trust you create, you can avoid probate, enjoy tax breaks, and protect your assets.

Trusts include financial assets, real estate, personal property, and more. You can also put cryptocurrency into a trust.

Putting your cryptocurrency into a trust ensures that your beneficiaries will be able to claim it easily and without having to search for important information about your wallet and key to the account.

Another benefit of a trust is that the contents are private, making it ideal for transferring crypto without worrying about maintaining the security of your account.

Thomas Mckenzie Law provides professional trust administration from experienced attorneys. We can help you establish a trust that includes your cryptocurrency along with all your other assets.

A trust can keep your crypto safe, provide privacy, and ensure that your loved ones get access to your assets as smoothly as possible. Contact us today to schedule a free consultation with our team.

Thomas McKenzie Law
Estate Planning Attorney in California. Full-service law firm specializing in estate plans, wills and trusts, long-term care, and financial consulting. Thomas L. McKenzie received his Juris Doctor degree from Western State University College of Law, in Fullerton, California. While working full-time at night and attending full-time daily classes, Tom graduated law school with honors in 1993.

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