3 minute read

How to Protect Your Cryptocurrency with an Asset Protection Trust

Due its digital nature, it's arguable that cryptocurrency needs an added level of protection. Here's why you should consider an asset protection trust.

Patrick Hicks

Patrick Hicks, @PatrickHicks

Head of Legal, Trust & Will

If you’re venturing into the world of cryptocurrency (or if you’re already there!) you need to understand why cryptocurrency needs asset protection. There are a handful of ways you can protect your crypto. We’re discussing them here. Read one to learn all your options for crypto asset strategies that protect your investment...namely Asset Protection Trusts.

Why Asset Protection is Important for Cryptocurrency

There’s no doubt that cryptocurrency is becoming a mainstream investment option. As more individuals flock to explore blockchain technology to try and understand what this type of asset entails, it’s more important than ever to look at how to protect it within your portfolio.

To do this, you need to first understand that crypto assets are arguably less “safe” than traditional assets. The nature of the blockchain itself leads to a credence of anonymity, as the data behind who owns what token is primarily kept secret.

However, this creates a unique challenge in situations where one must disclose all investments — such as in legal proceedings or during tax situations. While some feel simply not disclosing is a good enough option, the simple truth is that this would constitute fraud, which can and will catch up with you in the long run.

Instead, it’s a far better idea to take steps to protect your cryptocurrency in a manner that keeps it safe from creditors and ensures you better overall security. And that’s what strong crypto asset strategies, like an Asset Protection Trust, can do.

How to Protect Your Cryptocurrency

For residents of the United States, crypto protection isn’t always easy — but it’s definitely possible. The deregulated nature of cryptocurrency itself lends a lot of wiggle room in terms of what you can do to protect it. But this doesn’t mean you should skimp on making a calculated effort to do so. The most popular crypto asset strategies to protect your portfolio include offshoring and Domestic Trusts.

What does this mean? Offshoring is a term that describes the process of moving ownership of an asset to a Trust account in an overseas country. This completely legal strategy is utilized by some of the world’s wealthiest investors as a way to protect themselves from ramifications in certain instances. 

There are several nations to do this in, but the easiest for most is the Cook Islands, a small country in the South Pacific.

If that sounds a little too far-fetched for you, you can always use a Domestic Trust to protect your crypto. While it’s less protected than an Off-Shore Trust, it’s one of the easier options to set up. However, it’s important to understand that this option doesn’t fully protect you until it’s been in place for a number of years.

As a final option, you can also create an Asset Protection Trust. This is the most common way crypto investors protect their funds.

What is an Asset Protection Trust?

An Asset Protection Trust is a domestic form of protection that separates you from the liability of your assets. In the crypto world where everything on the blockchain, including wallet information is highly anonymous, many people think their actions can’t be traced. 

The truth is, the IRS views cryptocurrency as personal property, meaning they could seize it based on several factors — including any amount you owe them, fraud, or thousands of other reasons. With an Asset Protection Trust, however, that tether between you and the coin itself is legally severed, meaning it stays protected against any third-party seizure.

Why Choose an Asset Protection Trust to Protect Your Cryptocurrency

It’s important to understand that Asset Protection Trusts aren’t just for those who want to keep their crypto away from creditors. Instead, it can be a key way to protect this unique asset away from anyone — be that a soon-to-be ex-spouse or even an overzealous hacker. Even business owners need to be especially careful against liability lawsuits, where a judge could order all assets including crypto sold to pay for restitution.

Protecting your cryptocurrency starts with taking steps to ensure encryption and privacy. Never give out your wallet address and keep your key information in a safe, non-digital place. You should also look into access to a cold storage key, which is a device that keeps crypto wallet information secure from others.

However, the best asset protection strategies for cryptocurrency still include putting your crypto into an Asset Trust. Not only is this a legal way to protect your coins and tokens from potential malicious attempts by a third-party, but it also gives you peace of mind in knowing your investment is safe.

Create Your Trust Today

While this is an incredibly exciting time to invest in cryptocurrency, it’s crucial that you have a protection strategy in place. By thinking about the process now, and creating an Asset Protection Trust, you’ll be able to enjoy peace of mind, knowing your current and future crypto assets are stored safely away from any legal or information security issues from now on.

Are you ready to set up your Asset Protection Trust? Trust & Will makes it easier than ever for you to start or update your Estate Plan, so you know you’re protected, and all of your assets -  from standard, traditional investments, to property, to yes, even cryptocurrency, are protected.

When you’re ready to start investing in cryptocurrency, you want to be sure you understand how to protect yourself. A large part of that stems from ensuring that your cryptocurrency is a part of your Estate Plan

Is there a question here we didn’t answer? Reach out to us today or Chat with a live member support representative!


Subscribe to our newsletter for expert estate planning tips, trends and industry news.

    • Trust Pilot
    • Pledge 1%
    • Certified B Corporation
    • Better Business Bureau Accredited