Cryptocurrencies such as Bitcoin, Ethereum, and Litecoin are not backed by the US (or any) government or central bank, but by a community of miners and users. This makes them unique compared to other forms of currency. Cryptocurrencies can also be stored in digital wallets on computers or mobile devices.
Unlike fiat currencies, which are legal tender, cryptocurrencies are not regulated by a governing body and as such are often unable to be used to purchase goods and services. This often begs the question: “Can cryptocurrency be inherited in an estate?”
We will discuss that in this article.
Cryptocurrency as an Asset in an Estate
Cryptocurrency is often considered to be a volatile asset, but its value can be seen as more stable when it is viewed as an estate planning tool. In North Carolina, for example, a 2017 Digital Currency Regulatory Guidance specifically recognized cryptocurrency as an asset. Assets can be transferred to an estate. This means that cryptocurrency can now be included in a will or trust, just like any other type of property.
While the Digital Currency Regulatory Guidance may not have been specifically written with cryptocurrency in mind, its inclusion is a sign that this form of digital money is being taken seriously by lawmakers. Cryptocurrency’s growing popularity and increasing value are likely factors in this decision, as well as the fact that it is increasingly being used to purchase goods and services online.
What Happens to Cryptocurrency When Someone Dies?
When someone dies in North Carolina, their estate goes through a legal process known as probate. Cryptocurrencies are assets, so they’re subject to probate just like anything else.
If there is a will, when a person dies, their cryptocurrency is passed on to their designated beneficiaries. If the beneficiary is not specified, the cryptocurrency is passed on to the estate of the deceased. The executor of the estate will then be responsible for dispersing the cryptocurrency in accordance with the will or intestacy laws. Typically, the heir or next of kin will receive the assets of the estate, including any cryptocurrency.
Inheriting Crypto: How To Assess the Crypto Coins?
If you have a cryptocurrency wallet with assets in it, and you die without a will, your loved ones may not be able to inherit your coins. This is simply difficult or near impossible if, for example, your loved ones don’t know how to access your wallet or where it is located.
As such, if you want to ensure that your loved ones can inherit your cryptocurrency assets, you need to create a will that specifically mentions your cryptocurrency wallet and its location. You should also provide them with the passwords and other login information they will need to access the wallet. This sensitive information could be in the form of clues as to how to access your PC, for example, and get the passwords.
The Process of Inheriting Cryptocurrency
As we mentioned above, when inheriting cryptocurrency, the process is not much different from inheriting any other type of asset. The executor of the estate will need to list the cryptocurrency in the estate inventory, and then it will be transferred to the beneficiary/beneficiaries.
However, if the estate is subject to estate tax, as very large estates can be (estates over $12.06 million as of 2022), and any taxes owed are paid by the estate itself, not by the heirs.
Also, if there is any money owed to creditors, they need to be paid before the estate is distributed. This means that the creditors have a right to be paid before anyone else in the estate gets anything. If the estate does not have enough money to pay all of the creditors, the creditor’s claim may be prorated.
Get Started With Your Estate Planning
If you’re like most people, you probably didn’t think about crypto as part of estate planning when you first started buying cryptocurrencies. But now that your investment has grown, it’s time to start protecting your assets.
The good news is that estate planning for cryptocurrencies is just like estate planning for any other asset. You’ll need to create a will or trust that specifies how you want your coins distributed after you die.
If you live in North Carolina, there are a few things to keep in mind. For starters, you’ll need to name an executor who can manage your estate and distribute your assets according to your wishes. You’ll also need to choose a beneficiary or beneficiaries who will receive your cryptocurrencies.
Finally, you’ll need to make sure that your will or trust is properly drafted, and is signed, and dated. You will need a lawyer to help with the draft and to ensure that your estate plan is valid and your wishes are met after you pass away.
Contact Our Wilmington Estate Planning Attorney
If you have any questions about cryptocurrency and estate planning in North Carolina, contact David Anderson and his team today. We have the experience and expertise to ensure your estate plan is crafted according to your wishes.
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As a seasoned expert in the field of cryptocurrencies and estate planning, I bring a wealth of knowledge and practical experience to shed light on the intricate intersection of digital assets and legal processes. Having closely followed the evolution of cryptocurrencies like Bitcoin, Ethereum, and Litecoin, I've witnessed the transformative impact they've had on financial landscapes worldwide.
The article in question delves into the unique nature of cryptocurrencies, emphasizing their decentralized and community-backed foundation. This is a crucial aspect to grasp as it distinguishes them from traditional fiat currencies, which are typically governed by central banks and regulated by governments.
The mention of North Carolina's 2017 Digital Currency Regulatory Guidance showcases a nuanced understanding of the legal landscape surrounding cryptocurrencies. This guidance recognizes cryptocurrency as an asset, affirming its legitimacy in the realm of estate planning. This nuanced approach reflects the growing acknowledgment of digital currencies by lawmakers, underlining their increasing popularity and utilization for online transactions.
One key point raised in the article is the treatment of cryptocurrency in the probate process. When an individual passes away, their cryptocurrency, being classified as an asset, undergoes the same legal procedures as any other property. The role of a will or trust in determining the distribution of cryptocurrency to beneficiaries is highlighted, aligning with established legal frameworks.
The article provides practical insights into the inheritance of cryptocurrency, emphasizing the importance of clear instructions within a will. The potential challenges faced by heirs, such as difficulty accessing a deceased individual's wallet, underscore the need for meticulous estate planning. Offering specific guidance, the article suggests including detailed information like passwords and login credentials to facilitate a seamless transfer of digital assets.
Furthermore, the piece navigates the intricacies of the inheritance process, addressing potential issues such as estate taxes and creditor claims. The mention of estate tax thresholds and the responsibility of the estate to settle debts before distribution adds a layer of financial complexity to the inheritance of cryptocurrencies.
Concluding on a practical note, the article encourages individuals to incorporate cryptocurrency into their overall estate planning strategy. It emphasizes the need for a well-drafted will or trust, the appointment of a capable executor, and the careful selection of beneficiaries. The mention of seeking legal assistance from professionals like David Anderson underlines the importance of ensuring that one's estate plan aligns with legal requirements and individual preferences.
In essence, this article serves as a comprehensive guide, drawing on a deep understanding of both the cryptocurrency landscape and estate planning principles, making it a valuable resource for those navigating the intersection of digital assets and posthumous wealth transfer.
