Millennials are not the only ones investing in crypto / cryptocurrency and it is more than a passing fad. It has become an alternative purchasing and investment tool, with more than 8,000 different types of crypto available, representing billions in assets. You can use crypto to buy a Tesla automobile, an airplane or real estate. Regulations have recently been issued to permit banks to take custody of digital currency. One credit card company is even developing a card to allow consumers to spend digital cash using a credit or debit card.
Perhaps the ultimate recognition of this new currency comes from the IRS, which now requires owners to report income and capital gains earned on the sale of crypto and assess taxes on it, the same as other traditional types of investments.
As executors, you will be responsible for distributing the entire estate, including the cryptocurrency. As a fiduciary, you will have to learn what it is and how to manage it.
When people buy crypto, they receive a digital key. This is usually a string of numbers, symbols and letters representing the asset on a secure ledger. The key cannot be replaced, and if it is lost, so are the crypto holdings. There are many different ways to store this key, so the executor needs to know where the key is stored and how to access it.
The best way forward would be for the executor to spend time with the estate owner learning about cryptocurrency, what types s/he owns and how they are secured. Their conversation should also address his wishes for the investment. Does s/he want his grandchildren to receive it as crypto, or would he prefer to liquidate it before s/he dies and place it in a trust? Does s/he want to liquidate it after he dies, and have it become part of his estate?
When it is time to settle the estate, if the crypto has not been liquidated into cash, the executor will need to value the assets at his date of death, like any other investment and may either sell the currency or distribute it to the beneficiaries. If the estate is valued at more than $12.06 million, federal estate taxes will need to be paid on all assets, including the cryptocurrency. There may also be state estate taxes due.
The executor should also speak with an estate planning attorney about cryptocurrency, and also read the will to learn if the cryptocurrency is included. If there is no will or estate plan, now is the time to make an appointment with an estate planning attorney and get that in order.
Being an executor used to require learning about possessions like art or jewelry collections or fine rugs. Today, the executor needs to add a cryptocurrency education to their task list.
