Crypto investors should know asset protection strategies

On Behalf of | Nov 5, 2021 | Estate Planning |

It was not long ago that New Jersey residents who were creating an estate plan and wanted to protect their investments were thinking about concrete assets like real estate, automobiles, collectibles and cash. As time passed, however, different forms of currency have been created. Notably, cryptocurrency is rapidly becoming a part of the daily financial lexicon. With that, investors accrued crypto and enjoyed its rise in prominence and growing value. Still, there may be confusion when protecting it in an estate plan. Being aware of strategies to do so is imperative.

How new estate planning strategies can protect crypto

Time tested estate planning tactics may be ineffective with crypto. Since digital assets are reportedly worth more than $1 trillion, this needed to be addressed. Because the idea behind crypto is its security and keeping access to it private, it creates complications. People with crypto assets might keep it so close to the vest that potential heirs do not know it even exists. With crypto only accessible through private keys, it is important to take certain extra steps with crypto that would not be necessary with conventional savings, investment and retirement accounts.

Relatives and heirs should be cognizant that there are crypto assets in the testator’s portfolio. They should also have guidance with finding it and gaining access to the digital wallet. With a will, its details are available to the public. That can be risky with crypto, so the assets should be transferred soon after the testator’s death. Other factors are how much crypto there is in the account, the way in which the person invested in it and accurately allocating it. Naming a trustee for the digital assets can ensure it is shielded. The information to access the account should only be shared with a trusted person. The private keys can also be split and shared with separate people. There can be an addition to a trust specifically for crypto. Or there could be a trigger to automatically transfer the assets upon the testator’s death.

Protecting valuable assets like crypto requires guidance

With asset protection planning, people need to have proper advice in all areas. For potentially complex parts of an estate like cryptocurrency, it is even more important due to the potential confusion and challenges in effectively transferring it. Mitigating taxes is another consideration. With the litany of options available and the relatively new terrain with these investment vehicles, having help with an estate plan is essential and should be a priority.

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