Trusts may own cryptocurrency. In fact, we recommend that crypto investors use trusts as their primary estate planning tool because of the privacy afforded to trusts. Wills, in contrast, lack privacy. When a Will goes through probate it becomes public record. Since digital assets are only accessed through passcodes, passwords and PINs, for security purposes, this sensitive information should not be included in your Will should it go through probate.
There are four things to keep in mind if your trust owns crypto:
Choice of fiduciary
Some professional fiduciaries, such as banks, may have policies against serving as trustee of trusts that hold crypto. If you are considering naming a professional fiduciary, interview them regarding their policies, and always name an alternative trustee in case your first choice is unwilling to accept the appointment.
In most states, a trustee has a fiduciary duty to invest trust assets as a reasonably prudent investor would. As a result, most trustees invest in a balanced portfolio of standard assets, such as stocks, bonds, mutual funds, cash, real estate, etc. Because crypto may be considered “speculative,” there is a possibility that it may fall outside the boundaries of what would be considered a reasonably prudent investment for a trust. The solution to this is to include language in your trust that gives your trustee the specific authority to hold crypto as a trust asset.
Ensuring that your successors have access to your crypto is a topic that needs to be carefully considered. Make sure that your successor trustee has immediate access to your crypto wallet by communicating with them in advance about what they will need and where to find it.
Any distributions of crypto from your trust to its beneficiaries will need to be reported on the trust’s tax return. For this reason, it will be important for your trustee to know the tax basis of your crypto as well as its value on the date of transfer. Keeping records of how and when you acquired your crypto holdings will help the trustee comply with the reporting requirements.
If you own crypto, or if it is something you might own in the future, we have 5 practical tips to help you ensure that your crypto is incorporated into your estate plan.
Contact Fiffik Law Group to learn more about about including cryptocurrency in your estate plan.
Adding cryptocurrency to your estate plan is a delicate and technical job and is best to be accomplished by an attorney well-versed in different types of cryptocurrencies and digital wallets as well as estate planning and asset protection. The experienced estate planning attorneys at Fiffik Law Group can assist you in incorporating your cryptocurrency into your existing Will or creating a new Will or Trust with the digital financial assets and physical assets you would like to pass on. Contact us today.