Digital assets, or more precisely, cryptocurrency, are growing exponentially in terms of value and popularity. Although cryptocurrency and digital assets may have made certain transactions simpler, they have complicated the estate planning process. Clients who have acquired such assets must incorporate them into their estate planning documents or risk losing them forever. The traditional notion of distributing all assets via a residuary clause of a Last Will and Testament and then having an executor search for digital assets does not work in the new world of cryptocurrency.
What Is Cryptocurrency?
All cryptocurrencies are fundamentally the same. They are merely digital currency, which exist online and not in a material or tangible form. They are really just evidence of entry in a public ledger maintained through the use of blockchain technology. There are no physical coins or notes, nor are the funds controlled by a central government. The currency is encrypted and decentralized and, as a result, it is extremely difficult to counterfeit. In its simplest form, when an individual purchases cryptocurrency, the purchase is associated with a public and private key. The public key is visible to the entire network of decentralized computers across the world and is a specifically recorded transaction with a unique identification that cannot be changed. A private key is the digital equivalent of a password and proves ownership of the cryptocurrency, which is stored in a digital wallet and is the only method of accessing the digital currency.