Do you have Cryptocurrency or NFTs? They Should Be On Your Property Plan

As more and more people buy these assets, cryptocurrencies and non-tradable tokens (NFTs) are becoming a bigger part of the investment world. It’s important to account for these digital assets in your estate plan so that they pass on to loved ones when they pass away like more traditional assets. However, crypto and NFTs can present challenges when it comes to securing, transferring, protecting and gifting family wealth. New strategies are evolving to meet the growing demand for family planning and tax planning with such assets.

There are currently many different cryptocurrencies and NFTs. The top cryptocurrencies right now are Bitcoin, Ethereum, Binance Coin, Tether, and Solana, and they make up the bulk of the trillion-dollar market cap. NFT is a unique, collectible, tradable digital asset on the blockchain, such as a type of digital art, photography or video game avatar, and can only be purchased through a bidding process from an NFT marketplace. For example, you can buy virtual land and real estate in the form of NFTs. In November 2021, someone paid $450,000 to be Snoop Dogg’s neighbor in the metaverse. Sales of NFTs reached over $17 billion in 2021, demonstrating a growing desire for these collectibles.

Track Your Cryptocurrency and NFTs

The cryptocurrency is accessed via a private key, which is a series of alphanumeric characters known only to the owner and stored in a digital wallet or cold storage. The person in possession of the private key can buy, sell and use the digital currency. Your family or trustee should know that cryptocurrency exists, where to find the assets and what to do with them. One option is to share the seed phrase and private keys with your trustees. Another option for secure monitoring is to spy on your crypto assets and NFTs, such as a software application or hardware wallet. Companies that offer digital asset custody services include Coinbase, BlockFi, Casa, Unchained Capital, Anchorage, and Genesis. A third and more old-fashioned option is to make a schedule of your digital assets for your trustee and list the login protocols for each account, regardless of the cryptocurrency exchange you use.

Similarly, NFTs can only be accessed with a password or personal key. Like crypto, your password or personal key must be shared with your trustees before it can be transferred. A digital legacy (an organized, updated list of your digital assets and the relevant information and passwords a proxy will need to access them) can be a good place to store this information.

As a result, you need to make sure that the details of the ownership of the NFT and cryptocurrency, including private keys and passwords to access digital wallets, are accessible to the trustees – otherwise, the cryptocurrency and NFTs could be lost forever.

Cryptocurrency, NFTs and your Real Estate Plan

It is currently difficult to open cryptocurrency accounts and NFTs in the name of an irrevocable or irrevocable trust. However, there are wallets available that allow you to open an account in the name of a trust, or you can try to name a trust as the beneficiary of your account. This option is only available if the company that manages your account allows it. As of the time of this writing, our clients have often failed to identify beneficiaries of their crypto accounts. The ability to name a beneficiary is likely to develop rapidly and be available soon.

If there is no trust account and no designated beneficiary, your crypto accounts will pass as part of your probate estate at your will. You should make sure that your will, trust, and perpetual power of attorney include digital asset authorizations for the trustee who manages your estate. It is also important to know if your state has passed the Uniform Trust Access to Digital Assets Act (UFADAA) or the Revised Uniform Trust Access to Digital Assets Act (RUFADAA). 46 out of 50 states have passed either of these two laws. UFADAA and RUFADAA make it easy for your loved ones to manage your digital assets both during incapacity and after death.

Solution

The estate planning and tax issues surrounding NFTs and cryptocurrency are complex and continue to evolve. In future articles, we’ll cover tax issues and some planning techniques related to these assets.

Mirick O’Connell, Partner and Chairman of the Trusts and Real Estate Group

Real estate attorney Tracy Craig is partner and president of Mirick O’Connell’s Trusts and Estates Group. She focuses on estate planning, estate administration, marriage contracts, tax-exempt organizations, guardianship and guardianship, and old age law. Craig is a Fellow of the American College of Trust and Real Estate Advisor and an AEP® member. She received the AV® Superior Peer Review Rating from martindale-hubbell, the highest rating available for legal ability and professional ethics she.

Trusts and Real Estate Lawyer, Mirick O’Connell

Emily Parker Beekman is a partner of the Trusts and Estates Group in Mirick O’Connell. The focus of its practice is estate planning, estate and trust administration, and tax planning. Emily also specializes in property planning for people with disabilities, custodial and custodial and long-term care planning, and other seniors law.

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