Because so little as been written on this topic, I recently wrote an article (which the folks at Coindesk were nice enough to pick up) on the 5 estate planning items every bitcoin holder must handle to protect his or her loved ones. Due to Google policies against publishing identical content on multiple sites, please check out the 5 action steps directly on Coindesk here.
Because cryptocurrency is a new type of asset within the legal system, existing legal structures haven’t yet caught up to it. Unfortunately, since none of us knows when our time will come, we can’t afford to wait for slow-moving legislatures to solve this problem.
Luckily, bitcoin’s deregulated nature allows the necessary estate planning to be done even without the necessary statutory structure in place. The lack of statutory framework simply means that bitcoin owners must be proactive.
In my action steps, I give 5 estate planning items that all bitcoin owners must handle ASAP to protect their loved ones. These unique “to do” items are necessary for the following reasons:
- Bitcoin is treated as property rather than currency for tax purposes. This creates a bizarre system of tax consequences, some of which have been talked to death, and others which are unexpected.
- There is no central “bitcoin authority” which can give access to bitcoin to an executor or agent under a power of attorney.
- The legal system, being unused to cryptocurrency, may consider it to be an investment rather than a currency. In an estate planning context, this may give rise to an unwanted legal duty for an executor or trustee to diversify out of bitcoin into dissimilar items like stocks, bonds, and real estate.
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