Cryptocurrency -- What Estate Planners Need to Know

Abstract

Less than a decade ago, if an estate planner asked clients whether they owned any cryptocurrency, the most likely response would be, “You mean, money to buy a crypt?” Now, due to the widespread media coverage of Bitcoin, the most famous of all cryptocurrencies, most clients will have some basic idea about what the estate planner is inquiring. The use of cryptocurrency is increasing at a rapid pace. As of December 31, 2018, there were approximately 17.5 million Bitcoins in circulation worth over $67 billion. Although only a few cryptocurrencies in addition to Bitcoin are well-known outside the cryptocurrency community (e.g., XRP, Ethereum, EOS, and Stellar), over 2,000 different virtual currencies are actively traded. These other cryptocurrencies are sometimes referred to as altcoins, meaning that they are an alternative to Bitcoin. A recent survey revealed that 25% of individuals between the ages of 24 and 38 who either had $50,000 of investable assets or earned $100,000 or more per year own cryptocurrency. A growing number of mainstream businesses already accept Bitcoin such as Microsoft, Subway, KFC Canada, many Etsy vendors, Whole Foods, Dish Network, and Expedia. In addition, some law firms are already accepting Bitcoin in payment of legal services. This article starts by building a basic foundation about virtual currencies and how they operate. The article then reviews the estate planning and administration issues that arise with owning cryptocurrency and concludes with recommendations for how to address virtual currency in your practice.