Cryptocurrencies like Bitcoin, Dash and Ripple are on the rise as investment tools. A cryptocurrency is a form of digital currency that uses encryption for security. The virtual nature of the currency makes person-to-person transfers easier and less expensive because there is no bank involved; the encryption enhances security, protecting against counterfeiting and theft. Cryptocurrencies are usually stored in virtual wallets, such as GreenAddress, in hardware wallets that resemble flash drives, or on exchange sites, like Coinbase, where they are bought and sold. In any of these circumstances, access to the currencies is only guaranteed by use of a private key, or a username and password.
Cryptocurrency owners should include their holdings among the assets listed in their estate planning documents. Since wallets and exchanges are not banks, they do not provide for beneficiary designations. Therefore, login information required to access the account should be left in a secure but accessible location, such as on a secure USB drive, or on paper in a safe deposit box. Some exchanges, like Coinbase, provide a process for executors or trustees to request access to a deceased person’s account. However, the process may be lengthy, and requires several pieces of documentation, including a death certificate, will and other probate documents.
If a person dies without providing information regarding both the existence of cryptocurrency holdings and how to access them, the investment essentially disappears. Including these details in estate planning documents will help ensure these assets are distributed in the manner the owner intends. As always, it is wise to contact an experienced trusts and estates attorney for advice in these matters.