The Ultimate Guide on How to Leave Cryptocurrency in Your Will
Dan Mckenzie • May 17, 2023
CAN CRYPTOCURRENCY BE INCLUDED IN YOUR WILL?
In recent years, cryptocurrency has become a popular form of financial investment as investors find high returns. With this increase in wealth, more people investing in cryptocurrency seek to pass these digital forms of currency (e.g., Bitcoin, Litecoin, Ethereum, Ripple, etc.) on to beneficiaries after passing in a will. Including cryptocurrency assets in a will is possible, but it is not as straightforward as adding traditional assets.
THE DIFFERENCE BETWEEN TRADITIONAL ASSETS AND CRYPTOCURRENCY ASSETS
Cryptocurrency as an asset differs from traditional assets one might include in his or her estate plan or will. Traditional assets have a physical currency record, such as a bank account. For example, if you were to leave the fiat money in your bank account in your will to a beneficiary, it is typically required that the person handling your estate (your fiduciary) produce an original death certificate and letters testamentary to take control of the bank account once you’ve died.
In the case of cryptocurrency, once you’ve passed, it is not required to show proof of death or power of attorney. Cryptocurrency requires the fiduciary to have the decedent’s passcodes to access and transfer the cryptocurrency account for estate administration purposes. It is essential that you trust who you name as your fiduciary because the fiduciary could use the cryptocurrency passcodes to access and manage your cryptocurrency account with very little oversight.
STEPS FOR LEAVING CRYPTOCURRENCY IN YOUR WILL
There are several steps you must take to leave cryptocurrency in your will that are much different than the steps you would take to leave traditional assets.
STEP 1: SECURE AN ATTORNEY
- Secure a tenured attorney with the education and experience in incorporating cryptocurrency into estate plans and wills. Although cryptocurrency may be a new type of asset people want to protect and transfer after their death, there are experienced attorneys, such as the lawyers at The McKenzie Law Firm, who can guide you through this process to ensure all of your traditional and crypto assets are secure and inherited by your loved ones.
STEP 2: LIST YOUR CRYPTOCURRENCY
- List your cryptocurrency in your will. This may seem like an obvious step. However, if the crypto assets are not listed in the will, they can be subject to forfeit or residue (meaning the remainder of the aggregate of all of the probate assets of your estate) after your passing. It’s important to clearly describe your cryptocurrency and where it can be found in your will.
STEP 3: LIST YOUR DIGITAL WALLETS
- A cryptocurrency investment does not simply mean owning digital currency like Bitcoin or Litecoin. To purchase cryptocurrency, you must register your bank account with a digital currency exchange (e.g., Coinbase, Gemini, Coinbase, Paxful, eToro, Revolut and Robinhood) that accepts ACH bank transfers.
Once this is set up, through the exchange you can transfer fiat money using an ACH bank transfer to be able to buy cryptocurrency/digital currency like Bitcoin or Litecoin. Once you’ve purchased your digital currency it is not advisable to keep it in the exchange for a long period as it could be subject to a hack.
Because cryptocurrency investors take the security of their digital assets very seriously, they often create digital wallets. Digital wallets may be kept on a computer, a smartphone app, or a physical device. Common digital wallets are PayPal, Venmo, Google Pay, Android Pay, Samsung Pay, Alipay, Zelle, and Apple Pay, just to name a few. It’s important to list all and any digital wallets in your will for your beneficiary’s eventual access.
STEP 4: CREATE A MEMORANDUM WITH PASSCODES, PASSWORDS AND PINS
- When a will goes through probate, it becomes a public record. Since digital assets are only accessed through passcodes, passwords, and PINs, for security purposes, this sensitive information should not be included in the will should the will go through probate. A memorandum is a document referenced in a will but not part of the will or subject to public record. Memorandums can also be changed at any point in time. So, should you change access information to your digital assets, this can be changed in the memorandum without going through the legal requirements of changing a will.
- It is advisable to create a memorandum that includes:
- A list of digital wallets and where they are stored (e.g., computer, smartphone app, physical device)
- Website names and URLs to any exchange used for buying and selling cryptocurrency
- Username, passcodes, passwords, PINs, and keys needed to gain login access to the digital wallets, exchanges, websites, accounts, and devices associated with your digital assets
- Once the memorandum is complete, it can reside in a separate location with the will or your estate planning documents.
STEP 5: CREATE A CRYPTOCURRENCY ACCESS GUIDE
- Next, you will want to create a cryptocurrency access guide so that no confusion is left to your beneficiaries. Cryptocurrency isn’t as common as a bank account. Many people are unfamiliar with or have never used digital currency. So, by leaving a detailed guide on how to access your wallets and exchanges and buy and sell cryptocurrency for fiat money, you allow for little guesswork on how to use and access your digital assets on your beneficiaries’ behalf after your passing. The guide can be updated, included, and stored with your memorandum.
WHAT IF THE BENEFICIARY DOESN’T WANT OR KNOW ABOUT CRYPTOCURRENCIES?
If your beneficiary doesn’t want or know about cryptocurrency, there are a few options. For one, choose an executor of your estate who is tech-savvy enough to be able to exchange your cryptocurrency investment for fiat money. The executor of your estate can also hire an estate administration attorney to do this exchange.
Second, you can place your digital assets into a trust. It is essential to hire an experienced estate planning law firm, such as The McKenzie Law Firm, to ensure your digital assets are secure when your beneficiaries have to access your investments. As an added layer of security, trusts are not subject to probate, so your sensitive information will be kept out of public record until your beneficiaries access it.
EXAMPLE OF A CRYPTOCURRENCY WILL PROVISION
When including cryptocurrency in your will, consult an estate planning lawyer to help. An experienced attorney, like the attorneys at The McKenzie Law Firm, will make sure the provision will include:
- Name of the beneficiary
- Mention of crypto-coins, tokens, digital currency, exchanges, and cryptocurrency wallets
- A general list of where digital assets might be stored
- Mention your memorandum and cryptocurrency access guide
- Location of where your memorandum and cryptocurrency access guide are likely stored
TIPS YOU NEED TO KNOW BEFORE PUTTING CRYPTOCURRENCY IN YOUR WILL
There are a few key tips you need to know before and while you list cryptocurrency as an asset in your will:
- Do not put your passcodes, passwords, and PINs to your crypto accounts in your will as they could be subject to probate, which means that sensitive information will become part of public records and could cause a security issue and be compromised.
- When adding your cryptocurrency account or account information to your will, memorandum, and cryptocurrency access guide, trust your fiduciary completely, as that person will have access to your accounts.
- Update your memorandum regularly when you change a password, passcode, or PIN to ensure your beneficiaries can access your accounts easily once you pass.
- Make sure to write a thorough cryptocurrency access guide with step-by-step instructions on accessing your digital assets. Test the step-by-step instructions to ensure they are foolproof for when your beneficiaries use it.
CONTACT THE MCKENZIE LAW FIRM TO LEARN MORE ABOUT ADDING CRYPTOCURRENCY AS AN ASSET IN YOUR WILL
Adding cryptocurrency as an asset to pass down to a beneficiary in your will is a delicate and technical job and is best accomplished by an attorney well-versed in different types of cryptocurrencies, digital wallets, and exchanges, as well as estate planning and asset protection. This is where The McKenzie Law Firm excels. With the technical education and experience in the cryptocurrency investment landscape and asset protection.
The McKenzie Law Firm can assist you in incorporating your cryptocurrency into your existing will or create a new one with the digital financial and physical assets you would like to pass on.
Contact us today, and one of our experienced attorneys will guide you.
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