Some people treat Bitcoins like currency and spend them as such. However, planning for an estate that contains Bitcoins is different than planning for an estate that contains traditional currency in the form of dollars.
Bitcoins are very popular in some circles. The original premise was that Bitcoins were to be a digital currency that people could use on the Internet in the place of dollars. A key benefit was that Bitcoins were to be untraceable and uncontrollable by any government.
That original premise has not entirely come to pass, but many people do have large amounts of Bitcoins either for use as a type of currency or as investments. Recently the Wills, Trusts & Estates Prof Blog pointed out that Bitcoins need to be planned for differently in an estate plan in an article titled "Some Tips On How To Plan For An Estate Containing Bitcoin."
The tips include:
- Although many people think of Bitcoins as currency, the IRS does not and has ruled that Bitcoins are property. The difference has potential tax consequences and must be planned for accordingly.
- An estate planner needs to know specifically about any Bitcoins owned to ensure that they are planned for and not lost.
- Bitcoins often require an encryption key and password for access. Consequently, those need to be passed on to the appropriate parties or transferring them to the intended beneficiary might not be possible.
- A power of attorney should specifically state that the attorney in fact has the authority to manage the Bitcoins.
- If Bitcoins are part of the assets of a trust, the prudent investor rule might require that they be diversified into other investments.
If Bitcoins are part of your estate, then contact an experienced estate planning attorney to ensure that they are identified and distributed as you intend. You can learn more about this topic as well as other strategies on our website under the tab entitled: estate planning in Virginia. Be sure you also sign up for our complimentary e-newsletter so that you may be informed of all the latest issues that could affect you, your loved ones and your estate planning. However, proper estate planning is not a do-it-yourself project. Why not call us for a complimentary consultation at 757-259-0707.
Reference: Wills, Trusts & Estates Prof Blog (July 29, 2015) "Some Tips On How To Plan For An Estate Containing Bitcoin."