For investors with cryptocurrencies and non-fungible tokens (NFTs), there are some key implications as investors flock to 67% of millennials who see cryptoassets, especially bitcoin, as a “safe haven asset”. There are significant asset planning considerations.
Cryptocurrencies and NFTs: An Overview
Cryptocurrencies (think Bitcoin or Ethereum) are digital currencies where transactions are verified and records are maintained using cryptography rather than a central authority. Cryptocurrencies are held in “digital wallets”, the structure of which varies between online platforms.
An NFT is a crypto asset on a blockchain with a unique identification code and metadata. Unlike cryptocurrencies, NFTs are often a type of unique digital art (such as numbered art prints) that cannot be easily traded or exchanged. A popular example of an NFT is Jack Dorsey’s first tweet, which was auctioned for over $2.9 million.
Real estate planning considerations
It is important to inform your real estate planning attorney about your cryptocurrency and NFT holdings.
Trustee Access: Who will be appointed as the trustee to process the digital assets? Is this person tech-savvy enough to access and transfer the assets? Most states currently have unified fiduciary access to digital assets. We adopt the law (RUFADAA). This controls access to a person’s online girlfriend’s account if the account holder dies or is no longer able to manage the account. Additionally, many estate planners routinely include specific language in wills, powers of attorney, and trusts that specifically grant trustee access to digital assets. It is essential to nominate a trustee who is trustworthy and understands the nature of cryptocurrencies and her NFTs.
Record keeping: Maintaining records of cryptocurrency holdings, such as date of purchase, principal or purchase amount, location, passwords and access codes, is not only for security purposes during the life of the owner, but also for property and trust management upon the owner’s death. It is also essential for purpose. Individuals holding cryptocurrencies or her NFTs should consider keeping a detailed guide explaining how to access all digital wallets. If individuals responsible for collecting and distributing digital assets do not have access to digital wallets, those assets may be considered lost.
title: The most common holding mechanism for cryptocurrencies is online platforms. Coinbase and Robinhood are two popular options. Crypto titles and transfers vary by specific platform. For example, Coinbase does not give users the ability to add beneficiary designations, but states that “The names of beneficiaries on your Coinbase account are made by your real estate planning attorney…the ownership of your Coinbase account.” is your will or other arrangement….” For the purpose of wealth planning, users can directly title their Coinbase accounts with revocable trust. However, the Coinbase account must be linked to a traditional checking or savings account of the same title. Clients using the Robinhood platform can add beneficiary designations, but with the restriction that they must be individuals, not entities or trusts.
Gifts and ratings: Some online platforms allow users to gift cryptocurrencies. Robinhood’s terms of service state that they do not track gifts, which can be underreported. Property planners for clients wishing to gift cryptocurrencies or NFTs may need to have crypto assets valued for property and gift tax purposes. It is difficult to calculate, made even more difficult by the fact that few appraisers can handle such work.
Smart Contracts: Ownership and ownership of NFTs is much more complicated as only one person can own the actual token. Still, others may own the intellectual property rights to the content behind the Tokens, and additional individuals may own digital copies. Some of his NFTs include smart contract functionality, allowing NFT creators to earn a percentage every time the NFT is sold or transferred. Holding her NFT in a Limited Liability Company (LLC) could facilitate a more efficient transfer of ownership, as the benefits of the LLC membership could be transferred rather than going back to the blockchain for each transaction. I have.
Voluntary IRA for cryptocurrencies: Many people want to invest their retirement assets in cryptocurrencies. Traditional IRA rules apply, but individuals holding such assets should be aware of the related income tax implications. Due to the volatility of the cryptocurrency market, the required minimum distribution calculation can lead to large income tax claims, which can hinder distributions when the market is particularly low.