If you’ve jumped into cryptocurrency, don’t forget to figure out how to make it accessible to your loved ones when you die. What if the value increases and no one knows your private key? Here are some basics to help you think forward.
Planning for Your Private Key
The rollercoaster ride of cryptocurrency values makes it challenging to understand exactly what could be available for others—or the potential tax implications. However, what is clear, is that someone, ideally the fiduciary you name to oversee your affairs when you die (such as an executor, trustee or personal representative), knows how to access your cryptocurrency investments. As Crain’s Cleveland explains:
When a cryptocurrency unit is purchased, a private key is issued. A private key is a long string of letters and numbers… Like cash, the private key is stored in a “wallet.” There are two types of wallets: hot and cold. A cold wallet is tangible and disconnected from the Internet — a hard drive, USB drive or simply written on a piece of paper. A hot wallet is connected to the Internet and is accessible with a username and password.
However private keys are stored, a fiduciary must know of a client’s cryptocurrency and how to access it. Remember cryptocurrency is decentralized — there isn’t a 1-800 number for a fiduciary to contact. For a cold wallet, any related passwords or private keys should be stored with important documents (for example, in a fireproof box). For a hot wallet, a client should create a list of online account usernames and passwords for use by a fiduciary.
Good To Know: Fiduciary?
When you work with a lawyer on your estate plan, you will designate a fiduciary to administer your affairs when you die. Typically, if you have a will, this person is referred to as an executor, and if you have a trust, as a trustee. Depending on the circumstances and location, the fiduciary could be referred to as a personal representative or administrator. No matter what term is used, the family member, friend or professional you appoint has a fiduciary obligation “to act with the utmost good faith,” putting the interests of the beneficiaries before their own, while administering the affairs of the estate in accordance with the will or trust. Fiduciaries, for example, are legally prevented from using estate asset’s for their own benefit, take advantage of beneficiaries or co-mingle their personal assets with those of the estate.
Given the significant responsibilities involved in being a fiduciary, bonds can be very important. Fiduciary Law explains: A fiduciary bond is a legal instrument that essentially serves as insurance to protect beneficiaries, heirs and creditors when a fiduciary fails to perform honestly or competently. A court may require a fiduciary bond for any person or party that has fiduciary duty or responsibility to another. In general, a fiduciary is someone who owes a duty of loyalty to protect the interest of another. A fiduciary may be a trustee, executor, personal representative, administrator, guardian, financial advisor, or other person exercising control over another person’s assets and/or property. As a leading national provider of a full portfolio of fiduciary bonds, Colonial Surety makes it easy for fiduciaries in every state to obtain their required bonds. At Colonial, the steps to obtaining a fiduciary, executor, personal representative, administrator, trustee or other bond are easy: get a quote online; fill out the information, and enter payment. Print or e-file the bond right from your home, your lawyer’s office—or even while in probate court.
Estate Law? Need a Partner?
With clients coming to you with important and evolving considerations, like cryptocurrency, you need to clear more time to help them right? An easy time save is coming to Colonial Surety whenever bonds are needed. Our direct, fully digital, user-friendly system reduces the time, hassle and expense typically associated with bonding. In addition to providing a full portfolio of court and fiduciary bonds directly to the general public, Colonial Surety Company offers The Partnership Account® for Attorneys. This free business service provides user-friendly client management dashboards, enabling attorneys to easily coordinate, view, complete and e-file the court and fiduciary bonds clients need. Increase your efficiency—and lower costs for clients. See for yourself today: The Partnership Account® for Attorneys.
Founded in 1930, Colonial Surety Company is a direct writer of surety bonds and insurance products. Colonial is rated “A Excellent” by A.M. Best Company, U.S. Treasury listed, and licensed for business everywhere in the USA.