Are you someone who invests in cryptocurrency? Have you thought about how you plan to pass on your investments to loved ones one day?
According to CNBC, 1 in 10 people are currently investing in crypto assets. This is an asset class that uses cryptography and blockchain technology to secure it. A common example of a crypto asset is cryptocurrencies, such as Bitcoin, Ripple and Ethereum.
However, most crypto owners are likely not thinking about cryptocurrency estate planning, which is the process of protecting your investments so that they can later be passed on to loved ones. In fact, data tells us that 2 in 3 adults do not have a Will in place. This means that more often than not, crypto assets will be subject to the probate process when the owner passes away.
Trust & Will now offers probate help. Learn more about our different plan option, today.
If you don’t have an estate plan, don’t worry! Keep reading to find out how to avoid probate by transferring your crypto assets into a Trust. By educating yourself now, you can find out how to best protect your hard-earned investments so you can eventually pass them on to your loved ones.
Benefits of Using a Trust for Cryptocurrency Protection
If you own cryptocurrency, you need to be thinking about how you plan to work this asset into your estate plan.
Apologies for sounding bossy, but we want to make sure you’re protecting yourself and your loved ones. This is because cryptocurrency is unlike any other asset, and estate planning laws haven’t caught up to it yet. As you likely know, cryptocurrency is locked using a private key, which is typically stored in a digital wallet. Only you know how to access your cryptocurrency. If you were to pass away without leaving instructions or the legal authorizations to access it, your cryptocurrency will likely be lost in the digital ether. Now that would be a real bummer.
This is why we strongly recommend transferring your cryptocurrency into a Trust for the strongest level of protection. Here are the advantages of using a Trust for your digital assets:
Avoid probate altogether
Maintain your privacy
Make it easy for your loved ones to find your crypto assets
Gain more control over your crypto assets
We’ll expand on each of these benefits in the following sections. Before we get started, we invite you to review our guide on Trusts if you’re not familiar with them already. Having a foundation on how Trusts work will help you better grasp this discussion.
1. Crypto Assets in a Trust Avoid Probate
One of the key benefits of placing any type of asset in a Trust is avoiding probate. When an individual passes away, their estate passes through probate court, even if they had a Will. This process can take up to a year, and in some cases several years. This can be really hard on a family that is grieving. In addition, probate can cost 2 - 7 percent of the estate in court fees alone.
This timeline can also affect the value of your cryptocurrency. Because your beneficiaries won’t have access to your cryptocurrency during probate, it will be left vulnerable to the volatility of the market. Your diligently-monitored investments could lose their value overnight. Without access to your digital wallet or coins, your loved ones won’t be able to manage these investments or liquidate them if necessary.
By transferring your crypto assets into a Trust, they will not be subject to probate if you were to pass away. Your appointed Trustee should be provided concise instructions for how to access your cryptocurrency so that it can be distributed to your beneficiaries.
2. Crypto Assets in a Trust Remain Private
Another advantage of placing your assets in a Trust is privacy. When an estate enters probate, all of that estate’s information is a part of public record.
Smaller estates usually slip by unnoticed. However, large estates, or an estate with large cryptocurrency assets, could draw interest. Hackers could begin targeting those crypto assets, or the loved ones who may inherit those assets. Keep in mind that these loved ones may not be familiar with how to handle and secure crypto assets, leaving them more susceptible to schemes.
Because Trusts do not go through probate, any assets placed in a Trust are protected from the public eye. This privacy can help keep your security intact, and information just between you and your loved ones.
3. Crypto Assets in a Trust Make Them Easier to Find for Loved Ones
There are many cases in which someone could be investing in cryptocurrency, yet their family members have no idea. If you think about it, it’s so easy to invest casually using apps such as Robinhood or WeBull these days. One might never think to mention it to their loved ones. Because it lives in the digital space with no physical manifestation, and because it is protected by several layers of security, it is not easy to discover.
By placing your crypto assets in a Trust, you are creating clear documentation. Not only will your family members be aware that you owned any crypto assets, they’ll also have instructions on how to access it.
You may feel wary of including the keys to your cryptocurrency in the Trust document, for fear that someone would try and access your digital coins during your lifetime. It’s a great idea to create a separate document that describes how to access your cryptocurrency in detail. Then, you can store this document in a secure place, only to be accessed by your Trustee after your passing.
4. You Have More Control Over Your Crypto Assets with a Trust
Last but not least, transferring your crypto assets in a Trust gives you better control over what happens to them. A Trust document allows you to designate which assets you’d like to distribute to whom, when, and how much. You can also include special stipulations to ensure that the assets are utilized in the way you wish.
For example, some parents will name their children as beneficiaries. They will include stipulations for those children to inherit particular assets only after they’ve graduated from college, started their first job, completed a financial literacy course, or anything they feel is necessary to better protect the assets in the long-run.
In terms of cryptocurrency, you could implement stipulations to prevent a premature sale of your coins. You could pass the cryptocurrency to a loved one, but include the requirement that the Trust manage the asset for them indefinitely, and only sell the assets under the supervision of a financial advisor of your choosing.
In other words, having a Trust allows you to control the outcome of your hard earned investments.
Create a Trust for Your Crypto Assets Today
In this guide, we presented to you the option of transferring your crypto assets into a Trust. Many Americans do not have an estate plan, let alone having a plan for their cryptocurrency. This suggests that many owners of crypto assets are likely not considering what would happen to their digital coins if they were to pass away.
The lack of cryptocurrency estate planning involves several risks. First, family members may not have the opportunity to discover that the decedent had any cryptocurrency in their name. This could result in the crypto assets being lost in the ether since they are not regulated. Second, crypto assets could end up in the probate process, which puts the assets at risk of market volatility and a lack of privacy. Families who don’t know what to do with crypto assets, or how they work, could be susceptible to scammers and hackers.
The best way to protect yourself and your loved ones from this outcome is by placing your crypto assets into a Trust. Not only will it keep your matters private, it allows you to make sure that your cryptocurrency is passed on to loved ones in a constructive way. You get to control the outcome. Last but not least, we highly recommend that you also prepare an instruction manual so that your beneficiaries will know how to access your cryptocurrency.
Ready to establish a Trust so that you can better protect your crypto assets? Get started here!
If you’re also interested in including your cryptocurrency in a Will, we have this information in a separate, dedicated guide.
Is there a question here we didn’t answer? Reach out to us today or Chat with a live member support representative!