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Estate Planning for Cryptocurrency: What Every Estate Planner Needs to Know

What does estate planning have to do with cryptocurrency?

As estate planners, we are accustomed to dealing with traditional assets such as property, savings, and investments. However, in the digital age, cryptocurrency is becoming an increasingly important part of many clients' portfolios. With the rise of Bitcoin, Ethereum, and other digital assets, as professionals, we must adapt our approach to ensure these holdings are properly accounted for in will planning.

We were lucky enough to have Cryptocurrency expert Simon Dyer from Plutus, join us on a recent Adviser Quarterly Update, to look at Cryptocurrency and Estate Planning and how to unlock new opportunities by discussing this with clients. Here is a recording of the session:

Why Cryptocurrency Needs Special Consideration in Estate Planning

Unlike traditional assets held in banks or investment accounts, cryptocurrency is decentralized and stored in digital wallets, this means there is no central authority to contact in case of the owner’s passing. Another consideration is that access requires private keys, which, if lost, make the assets inaccessible. Added to which, security concerns may prevent clients from sharing details of their holdings.

Failing to properly plan for crypto assets can result in them being lost forever. When working with families to preserve generational wealth, we should ensure that clients have a clear plan for passing on their digital wealth.

Estate Planning For Cryptocurrency - What You Need To Know

Creating an Estate Planning Checklist for Cryptocurrency

To help clients effectively plan for their crypto assets, advisers can incorporate the following steps into client conversations, we have also put together a Cryptocurrency Checklist for Estate Planners with or friends from Plutos:

1. Identify All Cryptocurrency Holdings

  • Ask clients if they own any cryptocurrency and what platforms or wallets they use.
  • Encourage them to maintain an up-to-date list of holdings, including any exchange accounts and cold wallets.

2. Securely Document Access Information

  • Ensure that clients have securely stored private keys, seed phrases, and passwords in a way that can be accessed by designated beneficiaries or executors.
  • Use encrypted storage solutions or safety deposit boxes to protect sensitive information.

3. Determine Beneficiaries and Executors

  • Discuss who should inherit the cryptocurrency and whether the chosen beneficiary understands how to manage digital assets.
  • Appoint an executor who is familiar with cryptocurrency or provide resources to guide them.

4. Include Cryptocurrency in the Will

  • Clearly outline how the crypto assets should be distributed in the will, specifying beneficiaries.
  • Consider using a letter of instruction alongside the will to provide details on accessing digital assets (without including sensitive data directly in the will, as it becomes a public document during probate).

5. Educate Clients on Keeping Their Plans Updated

  • Encourage clients to update their will and estate plans as they acquire new digital assets or change wallets/exchanges.
  • Remind them to review their access and security measures periodically to keep their information secure.

How Estate Planners and Advisers Can Help

In our role as the professional adviser, we can play a crucial role in ensuring that crypto assets are not forgotten or lost. By proactively discussing cryptocurrency with clients, providing structured estate planning checklists, and educating beneficiaries, advisers can help clients protect their digital wealth for future generations.

If you’re an estate planner or professional adviser and want to stay ahead of the curve, now is the time to integrate cryptocurrency considerations into your will and estate planning services. Your clients will thank you for it!

We have partnered with our friends at Plutus Cryptocurrency to provide you with a free Estate Planning Checklist to work through with your clients. Get in touch today for your free copy.

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