Eric Schmidt, the former CEO and executive director of Google, once said that “the ability to create something that is not duplicated in the digital world has enormous value, and lots of people will build businesses on top of that.” And the advent of Cryptocurrency has lived up to the visionary Schmidt’s words. And with the colossal market based solely on it, Cryptocurrency has not disappointed people.
Cryptocurrency is a virtual, digital currency that needs passwords and keys for you to gain access. We need to include our digital estate when writing a will. Leaving Cryptocurrency in a will might make it impossible for your beneficiaries to gain access to your digital legacy. Hence, you must know how to include Cryptocurrency in your digital estate plan.
Cryptocurrency And Estate Planning: What Digital Investors Should Know?
One must pay attention to estate planning as one of the most crucial aspects of life. It is an individual’s formal agreement wherein they decide who will manage their assets in case they die and to whom the assets will get transferred. Estate planning ensures that everything you own is secure and passed to your beneficiaries with no hassle.
Cryptocurrency is a growing and thriving technology that makes transactions worldwide quick and secure. Cryptocurrency also limits the risk of your financial data being pirated, which minimizes the chances of fraud.
Digital investors today are thriving by making significant money by trading these digital assets, and the cryptocurrency market is increasing. But, the laws adhering to Cryptocurrency are still somewhat bleak. This makes the need for estate planning even more crucial.
Your digital estate needs to be accounted for when writing your will. You should keep a few things in mind to safeguard your assets and ensure they get passed on to your beneficiaries. This article equips you with everything you should know while crypto estate planning.
What Is Cryptocurrency, And Why Has It Been So Popular?
Cryptocurrency (also known as Crypto sometimes) is a form of currency that exists digitally or virtually and uses cryptography technology to secure transactions. It is managed through a distributed ledger, for instance, a blockchain. In the distributed ledger system, the cryptocurrency movement is tracked by computers to ensure the integrity and ownership of the financial data of the Cryptocurrency.
The decentralized system is the central authority that acts as part of the appeal for cryptocurrencies. It means there is no central regulating authority to record transactions and issue new units. Hence, Cryptocurrency keeps banks out of their system and reduces government involvement.
Cryptocurrencies exist through a process called mining. In mining, computers perform specific calculations to process transactions on the ledger. Mining is done to earn a currency unit, or sometimes a part of the unit. Mining requires a lot of electricity and processing power.
Cryptocurrency wallets can store Cryptocurrency. A “key” is used to make the transactions, much like traditional banks that use a pin. This key notifies the ledger of the transaction of the currency. These transactions are not immediately notified with the individual’s names, making Cryptocurrency appealing to people, which means you can make transactions anonymously.
The cryptocurrency market is flourishing. There is no seeming limit to the number of cryptocurrencies that can be created, and their range is mindblowing. Some of the most famous cryptocurrencies are Bitcoin, Dogecoin, Ethereum, and Tether.
How do I add Cryptocurrency to my will?
Cryptocurrency is a digital asset that you must include in your will. Although Cryptocurrency might not be seen as a traditional asset, it is imperative to be included in your digital estate planning due to its high value and trending market. Without specific information, your beneficiaries cannot access your digital currency.
Cryptocurrency does not exist on paper; hence, it can be challenging to discover an individual’s Cryptocurrency if one does not know where to look. Therefore, making your beneficiaries aware of your digital currency will alert them of its existence. Consider the following steps while adding Cryptocurrency to your will:
- Name the type of Cryptocurrency. The cryptocurrency market is booming. New types of cryptocurrencies are coming into existence, with Bitcoin being the most famous. Hence, the most crucial aspect of Cryptocurrency estate planning is merely naming the currency.
- Include necessary information. Necessary information that needs to be added to your will to ensure your beneficiaries can access your digital currency is listing your digital wallets. Without listing the exact location of the Cryptocurrency, your beneficiaries might never find it.
- List your passwords and keys. Complete access to your Cryptocurrency happens through passwords and keys. Since this is sensitive information, you can include it in your will or create a memorandum. A memorandum is used when you want to maintain privacy and hold information as an extension of the will.
- Include a detailed guide to explain how to access Cryptocurrency. In case your beneficiaries aren’t aware of how Cryptocurrency works, acquiring your digital assets can be tricky. Accessing the Cryptocurrency of another individual is a more confusing process. Therefore, leaving Cryptocurrency in a will without a guide on accessing it might not prevent your beneficiaries from getting access to it.
Is crypto considered a digital asset?
Cryptocurrency is a digital asset that is used as a medium of exchange. The ownership is recorded with a distributed ledger such as a blockchain. The technology that cryptocurrencies are based on relies on cryptography.
Is Cryptocurrency a probate asset?
Probate assets are assets that are held only in your name. Hence, they do not have a beneficiary designation or rights of survivorship unless you assign them. Like other real estate property, Crypto estate is a probate asset that requires you to list it in your will before it is legally transferred to your beneficiaries. Your beneficiaries can claim a non-probate asset without any involvement of the court. Your will does not control these assets.
Is Cryptocurrency an asset or property?
Cryptocurrency is considered a digital asset, but the Internal Revenue System (IRS) has classified it as a property, not a currency, except when Foreign Bank Account Reporting regulations use it. In FBAR, it is treated as a currency.
Three Reasons To Have An Estate Plan If You Buy Bitcoin
Cryptocurrency estate planning is a vital step you must take toward securing your cryptocurrency through a will. If you are the owner of a bitcoin, you must understand the need to transfer your digital currency to your loved ones in case of your death. Below are three reasons you must have an estate plan if you buy bitcoin.
- Avoiding your beneficiaries from going through probate. Cryptocurrency is a probate asset that needs to be included in your will to transfer your digital assets to your beneficiaries smoothly. Estate planning for digital assets is essential to ensure that your digital assets do not go through the tiring and lengthy probate court process before being handed over to your loved ones.
- Blockchain technology. Another vital aspect of accounting is blockchain technology in your digital estate. You need specific passwords and keys to access all of your digital assets, and hence it should be listed in your will. Without a step-by-step guide and passwords, your beneficiaries cannot use your digital assets.
- The central authority system. The cryptocurrency system is decentralized. This means the transaction process is done without the involvement of a bank or the government. But the downside is that no authoritative body oversees the affairs of Cryptocurrency. The laws surrounding Cryptocurrency are still under work, which makes it essential for you to list what exactly you want to do with your digital assets after you die.
Everything You Need to Know About Cryptocurrency
Cryptocurrency is a digital currency that uses encryption algorithms that make cryptocurrencies function as a virtual accounting system and a currency. The currency is stored in a wallet built on a cloud-based service, or it can be stored on your computer. The wallets store your encryption keys or password, which confirm your identity and give access to your Cryptocurrency.
Cryptocurrency is a relatively new concept, and the digital currency market, although thriving, is still comparatively volatile. Cryptocurrencies do not need banks to govern them, and the government’s involvement is minimal. This makes it challenging to get them converted to tangible assets, like the US dollar.
There are a plethora of cryptocurrencies, with Bitcoin being the most well-known. It was launched in 2008. Other newly flourishing cryptocurrencies include Dogecoin and Ethereum. Although investing in cryptocurrencies can be risky, many of the early adopters were able to make a significant amount of money through blockchain technology.
Cryptocurrency is a digital currency used to buy or sell things through a digital wallet, unlike traditional money, which can be used in physical forms such as a note or coin. The concept of crypto estate and the idea of digital money is highly fascinating. Although the market is relatively new, it is growing and thriving. If you are a digital investor, you must do your research before stepping into this market, much like any other investment.
You must include your digital assets in your will if you are a digital investor. Cryptocurrency probate can be avoided when you include your Cryptocurrency in your will. Cryptocurrency estate planning ensures your digital currency is safe and transferred to your loved ones without hassle.