A growing number of people hold crypto assets, such as cryptocurrency and NFTs, as part of their overall portfolio. The security protocols behind these assets are often a selling point for owners, but they can come with a downside. If the owner dies without recording the information needed to access crypto assets, beneficiaries have no third party they can go to for a resolution. In short, a lack of planning can make it impossible for beneficiaries to access these assets. On the other hand, being careless with how access to information is shared and stored can make it vulnerable to being stolen.
This presents a significant estate planning conundrum for Texas crypto asset owners. While the ideal solutions to these challenges are ever-evolving, here are some tips owners can apply to prepare crypto assets to change hands after death:
Maintaining clear records
Records are necessary for many reasons. First, they will ensure that an executor and beneficiaries know about the very existence of the crypto assets. Second, they will give them key details needed to access these assets, which is absolutely necessary so they can be both distributed and included in the final tally of assets for taxation purposes.
Storing sensitive information properly
Private keys are incredibly important for beneficiaries to access crypto assets. The problem here is that many owners keep this information on hardware that also requires a password to open, and not having that password available after they pass can mean assets are lost forever. Owners of these assets should deeply consider the best way to store such information when creating estate plans.
Be precise in estate planning documents
A will should have clear instructions about how the assets should be used after death. Should they be sold before distribution, or distributed with the option for beneficiaries to sell them if they so choose? How should sensitive information be handled by the executor?
For those passing crypto assets to loved ones who do not have experience with these types of assets, precise planning is particularly critical. This could also be a consideration when selecting an executor, and someone who has at least a basic understanding of this asset type might be a good option if this is a significant part of one’s estate. It is a good idea for those in Texas looking to create a comprehensive estate plan to discuss concerns and best practices about all their assets, including crypto assets, with an experienced estate planning attorney.