Although Bitcoins have been around for about five years now, many have failed to properly address what to do with their Bitcoins in the event of their death. Does it simply pass to your spouse? Your heirs? Do they need specific paperwork? Well, the IRS has attempted to clarify all of these questions by issuing a recent statement stating that bitcoins are not currency but rather are considered personal property.
While this might be confusing to those who use their Bitcoins for purchases and investments (essentially as currency), it is important to make sure your Bitcoins are properly identified in your estate planning documents. Here are a couple of things to consider when incorporating your Bitcoins in your estate plan:
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Identifying Your Bitcoins. It is important that somewhere in your estate planning documents, whether it be in your Trust and/or Will or in any other ancillary document, your Bitcoins are mentioned. Given the private and confidential nature of Bitcoins, if no one is aware that you own Bitcoins, they could potentially be lost.
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Granting Access After Your Death. In accordance with the first point to consider, it is also important that you grant your trustee or executor the power to have access to your Bitcoins. This could be done by giving the trustee or executor your private key or username/password. Of course there are privacy considerations with doing so. You can simply include this information in a safe place until it is needed.
Granting Access During Incapacity. Our firm makes sure that we are not only planning for what happens after your death, but also in the event you are incapacitated. It is recommended to grant your agent under a Powers of Attorney authorization the ability to access/manage your Bitcoins, and essentially all of your digital assets.
