Cryptocurrency has only been around since 2009 but it has already become a source of great confusion when it comes to estate planning and valuation. The law has lagged behind the time with regard to virtual assets, but this is to be expected. There is so little precedent for these kinds of investments that it can be very complicated for a real value to be placed on them. If you have crypto that needs to be included in your estate planning, you might have a lot of questions about how this should be managed.
Why is Crypto So Difficult to Include in Estate Planning?
Crypto does not have a set value in the way that other items do, and the relative value of different currencies can vary wildly. The other trouble is that control over crypto is very individual which means that there are always difficulties with the legal transfer of this kind of asset to survivors. Your crypto can be included in your will and they would be distributed as directed, but then the beneficiary might never be able to access them successfully. They might also be subject to significant inheritance tax in the state of Pennsylvania.
There is also no central regulatory control for crypto like there is for other forms of assets or money. This is because of the blockchain technology that makes crypto possible. Without the access code and private keys to the crypto that you own, no one who survives you can access them either and some people have lost billions in crypto coins when a loved one dies without the right estate planning in place.
The New Pennsylvania Digital Assets Laws
Pennsylvania recently made some new laws that govern the inclusion of crypto and other digital assets in estate planning. These laws recommend that you write down on paper a list of your digital assets, where they are located, and how to access them. This paperwork will then need to be stored in a very secure location with instructions to the executor about how to access them.
You will then need to assign digital powers to your executor in your will and allow them control over your crypto. Your will must address who specifically gets what with regards to digital assets. This includes analysis and documentation. There are so many factors that can go into this process of assigning over access to the crypto that you have and you will need to repeat this process for each kind of crypto that you have in hand.
Under RUFADAA in PA, it is illegal to access a dead person’s digital accounts without their permission. The various different entities that manage crypto might have their own regulations about this but PA has made this a matter of law. This is why it’s so important to be sure that your estate planning process includes these important steps before you pass away. Your loved ones will have no legal right to access your crypto once you are gone if you do not put these protections in place.
Will My Crypto be Taxed?
Yes, crypto that has been left to family members as inheritance will be taxed according to the value at the date of the death of the former owner. It will be subject to PA Inheritance Tax as well as capital gains tax. This can really add up if you have a lot of crypto, so you will need to make sure that you consider carefully your ownership of this asset. Since you cannot co-own your crypto with someone else before your death and the value of this asset can vary so widely, it can be hard to determine if keeping your crypto is a good idea or not in the long run.
Estate planning can be critical with regard to digital assets so an expert in this area can help you to understand your options. There are not many ideal ways to handle digital assets, so you might have some tough choices to make if you think that there is any chance that you could pass away in the near future with crypto assets in hand. These are tough questions but they can be cleared up by an inheritance and estate planning expert with ease.
At Antanavage Farbiarz, we offer expert estate planning services. Our Lawyers can explain all aspects of estate planning and work with you on various kinds of estate. We offer guidance on making donations through wills, trusts, gifts, and other methods as well. To discuss your will and estate planning concerns, call us at (610) 562-2000 or use our contact form to schedule an appointment.