- Cole Gorman
Accounting for unique assets in estate planning
Cryptocurrency has provided investors a financial roller coaster. What was worth one penny in 2010 ballooned to $20,000 seven years later. After continued increases and decreases over the past few years, the value of the digital monies has settled in at $11,000.
Bitcoin exists in cyberspace and is not an asset that can be stored in a bank account or safe. In reaction to the unexpected “boom period,” owners desperately searched for old hard drives that housed their potential riches.
The cryptocurrency quandary
Sizeable amounts of cryptocurrency should be as much a part of an estate plan as other tangible and equally valuable assets. All documents involving the estate, business succession and financial plans must reflect this unique form of currency.
Investors in cryptocurrency go through a significant learning curve to understand how the currency works, along with the positives and negatives of ownership. Like any other commodity, it is also subject to the volatility found in stocks, fluctuating to the highest of highs and the lowest of lows.
That primer and all related information should be included with estate documents. Information should include private keys and seed phrases that safeguard cryptocurrency and ensure security that can prevent any attempts at theft via hacking.
High standards of security are also vital when it comes to preserving the benefits of cryptocurrency. While considered secure, protections must be put in place to preserve the value. Keep in mind that when it comes to estate taxes, the Internal Revenue Service treats cryptocurrency as property, not money. Fair market value after conversion to U.S. dollars are subject to capital gains tax.
As with any aspect of estate planning involving assets of all types, the help of an attorney can make a significant difference in preserving a legacy for you and your heirs.