As the world goes digital, assets follow suit. Even if an asset isn’t physically tangible, professionals suggest owners include it in the will. If not, they risk forever losing assets like cryptocurrency.
Patrick Saccogna, partner at Thompson Hine LLP, and Eddy Zillan, founder and CEO of Cryptocurrency Financial, both in Cleveland, said to make a list of all online accounts before filing an estate plan.
“It’s very important to have all that information written down and kept in a safe place,” Saccogna said. “The information could then be given to the attorney or the people who serve as executor of the will. We have to keep track of this stuff, otherwise, it gets lost. That can make it very difficult if your estate planning client dies.”
Zillan said cryptocurrency is not something one can just leave to someone else.
“It’s pretty much the same as U.S. dollars, but you’d have to convert it (and) you need the login information before someone can get it,” he said. “While sitting there (in the account), it would never be able to be touched after, without working with the broker it was purchased through if you don’t have the access information.”
Saccogna said cryptocurrency in estates is a hot topic and has been over the last five to 10 years.
“Ohio law last year created a new statue about digital assets and estate planning, which makes it better but it’s still important to always consider online assets in estate planning,” he said. “It’s critical to include everything.”
Zillan said he believes cryptocurrency will grow to be more prominent in the estate planning world.
“The majority of people who are invested and involved in cryptocurrency are in their 20s to 40s, so they won’t really be in-depth estate planning yet,” he said. “But, it’s going to be something that will be huge in the future.”
He added that estate owners should be aware that planning for cryptocurrency can be difficult.
“It would be almost impossible, unless a type of cryptocurrency that doesn’t need two-step identification is developed,” Zillan said. “The reason cryptocurrency was created was to solve a problem. So, people will have to develop a cryptocurrency to address this problem. That way, it could be automatically paid out instead of relying on someone leaving you the required information.”
But for those who hold cryptocurrency now, Saccogna said estate planning is not just an option – it’s necessary.
“If someone dies owning cryptocurrency without telling anyone else about it, that currency dies with the owner and is lost forever,” he said. “It’s now estimated that 20 percent of all bitcoin is lost – which is about $25 billion. Part of the allure of cryptocurrency is its privacy and that each individual has a private key or password. If the person who dies is the only person who knows about the key, it’s lost.”
To securely pass this information, Saccogna said individuals should record where they got it, how much they bought and store the hard copy in a safe.
Saccogna said it’s important for people to keep in mind the tax aspect of cryptocurrency.
“The IRS has provided some guidance for federal tax purposes,” he said. “Cryptocurrency is not cash – it’s personal property. So, when someone goes to spend or sell bitcoin, there are capital gain consequences if the value of the property increases.
Though the cryptocurrency will remain in one’s online wallet after death, Zillan suggested beneficiaries contact a lawyer if they can’t access it.
“You’d want to hire a lawyer and that lawyer would need to file against the platform (the cryptocurrency is stored on),” he said. “They’d have to prove it’s their loved one’s property and see if the platform would release it to them. This would be worth it if someone has a lot of money in online assets.”