Stephen J. Lacy
You’ve probably heard a horror story about the massive and catastrophic loss of personal cryptocurrencies.
A recent story that has received international attention, centered on the premature death of Matthew Mellon, the heir to the bank and the former chairman of the Finance Commission of the Republican State Commission in New York. In the early days of cryptocurrency, Melon purchased $ 2 million worth of XRP, a cryptocurrency founded by the United States. Melon died suddenly in 2018 after a long struggle between bipolar disorder and substance abuse. At the time of his death, the cryptocurrency he purchased was valued at $ 500 million. Melon distributed the private keys to access this cryptocurrency to several bank vaults, but unfortunately none of them were documented. This property is currently inaccessible.
This story serves as an extreme example, but as cryptocurrencies grow exponentially, such scenarios are becoming more and more common. According to a new study, 46 million Americans own Bitcoin, the most popular cryptocurrency. And frankly, people are getting rich from these investments. Last year alone, the value of Bitcoin increased astronomically by 440%. As a result, developing a real estate plan that includes crypto assets is absolutely essential.
What are the key factors in creating a real estate plan for your crypto assets?
The most obvious and important part of establishing a crypto asset for real estate planning is the location of the crypto asset and the documentation of the password or “private key”. Cryptocurrency assets are typically stored in one of four ways: (1) Online exchange (custodian wallet), (2) Hardware wallet, (3) Mobile wallet, (4) Local software wallet.
Access to crypto assets is controlled by the private key, regardless of storage choice. The big advantage of private keys is that they are almost impossible to hack. The downside is that if you lose, misplace, or forget your personal private key, you will not have complete access to your crypto assets. Even cryptocurrency exchanges cannot recover your keys.
Second, it’s important to contact the real estate planner to understand where crypto assets are held and how they are accessed. Trustees (ie, executors or trustees) must be granted specific privileges to access digital assets and online accounts in accordance with Florida’s Digital Assets Trustee Access Act (“FFADAA”). there is. The real estate planning document outlines to whom the assets will be delivered, and in some cases it is necessary to select a special trustee who is familiar with this type of asset to manage these assets. Due to the nature of notifying trustees of private key information, very careful consideration is required when choosing a trusted trustee. This is also very important when choosing a power of attorney in case of disability.
Finally, the IRS considers cryptocurrencies to be assets. Therefore, careful consideration should be given when tracking the rationale for an asset, such as capital gains taxes being paid at the time of sale. Under current law, if a beneficiary receives these assets as part of an inheritance, the cryptocurrency may basically receive a “step up” and eliminate the rise in lifetime capital gains.
The world is changing rapidly. Cryptocurrencies are another example of this. Like other assets, cryptocurrencies need protection. Without careful planning and regular updates with your real estate planning attorney, immeasurable wealth can be lost.
Stephen J. Lacey, JD, LL.M-Tax and Managing Members belong to the Law Office of Lacey Lyons Rezanka.
Three Key Elements of Cryptography in Real Estate Planning
Source link Three Key Elements of Cryptography in Real Estate Planning