Estate Planning for Cryptocurrencies

Estate planning, like most aspects of life, changes over time. One of the most striking recent changes is the need to plan for cryptocurrencies like Bitcoin, which did not exist a little more than a decade ago. Yet because of the potential value of these assets, and the volatility of that value, they could end up being a significant part of the estate of a person who has invested in them. It's time to take a look at the legal and practical aspects of estate planning for cryptocurrencies.

First off, we need to understand what law governs this issue. Most states have laws governing access to computers and digital assets. Where is cryptocurrency "located" for purposes of determining what law controls?

The Problem of Gaining Access to Cryptocurrencies

Like other digital assets, cryptocurrency is considered intangible personal property. For estate administration purposes, intangible personal property is considered to be located in the state where its owner was last domiciled. (Domicile is itself a legal concept, referring to the place a person treats as their permanent home.) So for an Ohio resident who owned cryptocurrency, those assets would be subject to estate administration in Ohio.

But how does the fiduciary "get" those assets to administer? It is one thing for a fiduciary to take control of tangible assets, like a vehicle or art collection. Cryptocurrency is a trickier matter. For one thing, it is a crime in Ohio to access a computer or other device without authorization.

Fortunately, the recently enacted Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA) creates avenues for an Ohio resident to grant a fiduciary (like the executor of an estate, or an agent under a power of attorney) consent to access digital assets and communications. But it is unclear whether RUFADAA would allow a fiduciary to take the steps necessary to access cryptocurrencies, even for purposes of estate administration.

Ohio Revised Code section 2137.03(A) does provide for an owner of a digital asset to use an online tool through a digital asset account to grant access to a fiduciary. Section 2137.03(B) allows an owner of a digital asset to provide access through a will, trust, or power of attorney. Either of these will override terms of services agreements (TOSAs) that conflict with them, but if the will, trust or POA conflicts with the use of the online tool, the online tool will control.

Because RUFADAA is largely untested with regard to access to cryptocurrencies like Bitcoin, however, it is best for an owner of cryptocurrencies to plan for their administration through deliberate estate planning.

Helping Your Fiduciary Administer Cryptocurrency

Cryptocurrency may be stored on an exchange or in a hardware or software "wallet." When estate planning, the goal is to provide your fiduciary with information he or she will need in order to access the assets at the proper time, but not to do anything to jeopardize the security of the assets in the meantime.

For instance, for exchange-stored cryptocurrency, you should prepare (and keep current) an inventory informing the fiduciary which exchanges are used, and which, if any, no longer are. Experts differ on whether you should provide your fiduciary with login credentials. If you do, and the inventory with credentials falls into the wrong hands, someone could access and convert your cryptocurrency. Virtually all experts agree that you should keep information (login credentials and the inventory) separate to protect assets. Your fiduciary may be able to enlist the assistance of a customer service representative for an exchange if they can demonstrate that they should have access to your assets.

If you are using a hardware or software wallet for your cryptocurrency, there will probably not be a customer service representative available. Most cryptocurrencies operate using a two-key system: a public key which is used to keep a log of transactions, and a private key which is used to gain access to the assets themselves.

The private key is similar to a password for an online bank account. Keeping it safe is critical, but not simple. Storing it digitally could leave it vulnerable to hacking; storing a physical copy may leave it vulnerable to theft. One expert has suggested making a physical copy of private keys and storing it in a highly secure location like a safe deposit box.

If cryptocurrencies make up part of your assets, don't leave their management and distribution to chance. Communicate with your intended fiduciary and work with an experienced estate planning attorney.

If you have questions about estate planning for cryptocurrencies or other unusual assets, contact Gudorf Law.

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