With the digital age, entrepreneurs and technology-lovers alike have poured unprecedented time, labor, and resources into the development of alternate, internet-based economies. Now, in today’s modern world, physical currency is no longer the only accepted mode of exchange. While many financial advisors continue to regard cryptocurrencies such as Bitcoin with caution, many people have made veritable fortunes with them.
Under the right circumstances, and with appropriate guidance, you could use your digital assets to lay the foundation for an intergenerational legacy.
The Role of Cryptocurrency in Today’s Investment Economy
Today, almost every savvy investor is at least somewhat familiar with the idea of cryptocurrency. While Bitcoin is, by far, the most popular modern cryptocurrency, it is not the only one.
Other Common Cryptocurrencies
- USD Coin
Unlike traditional currencies, such as the United States Dollar or Indian Rupee, a cryptocurrency is a digital asset that is exclusively crated and traded online. Every cryptocurrency has its own process to “mint” and circulate units.
Bitcoin, for instance, was created using blockchain technology. When Bitcoin was first released, enthusiasts could “mine” the internet to effectively uncover and retrieve individual Bitcoins. However, Bitcoin was always intended to be a finite resource. Since most Bitcoins have already been “mined,” and there is no way to mint new units, most contemporary Bitcoin-related transactions occur between individual investors’ cryptocurrency wallets.
Although cryptocurrency might seem like a volatile investment, it has found increased acceptance in recent years. Tesla, for instance, allows consumers to purchase brand-new electric vehicles with Bitcoin.
Understanding the Digital Estate
Unlike most other states, California has already revised its Probate Code to account for the digital estate. In 2016, then-Governor Jerry Brown signed Assembly Bill 691, also known as the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA).
Among RUFADAA’s most novel additions to the state Probate Code is a section allowing California residents to use traditional estate planning strategies to legally transfer digital assets to designated beneficiaries.
Transfers Under RUFADAA
Under RUFADAA, the writer of a will or creator of a trust could grant an estate executor:
- Access to a virtual account or accounts
- Partial access to an account, allowing them to distribute or transfer assets to heirs
- Resumed access to an account they would have been able to use if the grantor were still alive
RUFADAA could provide a streamlined, safe, and legal route for cryptocurrency investors to share their digital wealth with friends, family, and preferred charities.
Why You Need a Plan for Cryptocurrency
Although California’s Probate Code now accommodates digital assets, cryptocurrency-based estates can still encounter unexpected obstacles.
Possible Problems With Cryptocurrency
- The anonymity of blockchain-based transactions, and a lack of any central regulatory authority, means that cryptocurrency investors must leave detailed instructions to their executors on how to access and disburse their digital assets.
- Since cryptocurrency is still a relatively recent innovation, the value of individual coins is anything but stable. The value of a single Bitcoin has, for instance, fluctuated tens of thousands of dollars in the past decade alone. If a cryptocurrency’s trading price falls or rises by a substantial margin, heirs may be impacted by federal capital gains taxes.
- Estate executors have a legal obligation to act in the best interest of the estate. However, many potential executors—including many estate planning attorneys—lack the knowledge, skill, and experience needed to manage cryptocurrency effectively.
The Law Firm of Kavesh, Minor & Otis, Inc. can help you prevent any unwanted challenges to a digital estate. Our experienced team of attorneys constantly monitors new developments in technology, investing, and estate law, ensuring we have the tools needed to safeguard non-traditional estates.
Do You Need to Speak With an Attorney About Estate Planning?
If you need to speak with an experienced estate planning lawyer please contact us online or call us directly at 800.756.5596 to first register for one of our free, informative seminars. Your attendance will qualify you for a special discount for our estate planning services should you decide to make a free appointment at the conclusion of the seminar and choose to proceed with us. We proudly serve clients throughout California with offices in Torrance, Newport Beach, Orange, Woodland Hills, and Pasadena.