What is Estate Planning with Cryptocurrency?
October 24, 2019
With cryptocurrencies appearing more in the financial portfolios of tech savvy investors, digital currency, such as BitCoin, is complicating the way people save, invest, and plan for their futures. BitCoin may be the most well-known cryptocurrency, but there are more than 1,000 different types of digital currency available today. They all exist in cyberspace and are regarded by many to be a safer option than many traditional assets. By using blockchain technology, cryptocurrency is unaffected by world market forces or government interference. However, it does fluctuate in value, much like real estate, a traditional favorite of investors.
What is Blockchain?
Blockchain technology is used to keep track of cryptocurrency in the marketplace. All transactions are recorded by a network of computers, the independence and public nature of which serves to verify and record the authenticity of transactions without individual oversight or management. The computers use algorithms to keep track of purchases, sales, and exchanges made with digital currencies.
Users employ blockchain technology by registering for a user address others can access to transfer money, in its digital form, to them. Anyone with your user address can record a transaction to transfer digital currency to you. The network records the transaction into the publicly verifiable database and the transaction is complete.
Cryptocurrencies and Your Estate
Even though cryptocurrencies function just like cash in person-to-person transactions, when it comes to tax purposes, it is treated as property. If you hold cryptocurrency as part of your financial portfolio, that will be handled differently than the rest of your wealth. For example, if your estate includes BitCoin, converting the virtual money into cash may allow your heirs to realize certain tax benefits. At the same time, liquidation of these virtual assets may result in a capital gains tax bill.
These considerations should be brought to light as part of your wealth strategy, as they have the potential to adversely impact your overall plan. At least one major CPA trade group has sought advice from the IRS to clarify certain rules regarding taxation and accounting practices as they apply to cryptocurrency. Much of it remains unsettled. Owning cryptocurrency as part of your portfolio can be a great way to take advantage of the new financial benefits of the promising new asset, but with such confusing and evolving standards, it is difficult to keep up. The advice of an experienced estate planning lawyer can be invaluable when making such consequential decisions for your financial future.
Brooklyn Elder Law Lawyers at Korsinsky & Klein, LLP Provide Experienced Estate Planning Advice
Estate planning can be complex and overwhelming. The Brooklyn elder law lawyers at Korsinsky & Klein, LLP have the experience to walk you through all the major decisions that will benefit your family when you are gone. Contact us online or call us at 212-495-8133 for an initial consultation today. With offices in Brooklyn, New York, and Lakewood, New Jersey, we work with clients throughout Manhattan, Long Island, and Westchester, New York.