As of 2021, cryptocurrencies such as Bitcoin, Ethereum, Litecoin, Binancecoin and Dogecoin are taking the world by storm. Many people have invested in these assets over the past few years and recent booms means that they have significantly increased the value of their assets which is great! However, what people have not come to realise as of yet is that as these assets grow, your need to protect them grows! From an estate planning perspective, this is very, very important because in the event that you were to pass away, you may not want your millions of Dogecoin sitting in an exchange.
What is Cryptocurrency?
In a nutshell, a cryptocurrency is just like a digital form of money. Cryptocurrency can be used to pay for things such as food, flights, hotels or even in some situations, property. As cryptocurrency is a digital form of currency, it can be sent anywhere in the world. This is one of the reasons why cryptocurrency has taken off so quickly as it removes the need for a bank.
Why do people own and buy Cryptocurrency?
As cryptocurrency is a relatively new concept and technology, different forms of it are being created and adapted each day. When these technologies are created, they release digital “coins” which are deemed to have a value. These coins in many people’s eyes are seen like shares, which people buy hoping that they increase value over time.
This is one of the reasons why the cryptocurrency sector is seen like a version of the share market, although it is deemed to be highly volatile. Due to this, many people out there hold their cryptocurrencies as an investment. Much like holding property, cash in the bank or shares, cryptocurrency should be protected, much like any other asset you may own.
Tips on Protecting Your Cryptocurrency?
These are our following tips that you should consider following to protect your investment, in the event something was to happen to you.
- Get a will – This is very important as it will not only protect your cryptocurrency assets if you pass away, but it will also cover all your assets. You want to ensure that in the event of your passing your crypto goes to the people who matter to you most. If you don’t have a will there is a chance that it passes to someone you may not want to receive it (i.e. ex-partner). In your will you also can give people specific gifts of cryptocurrencies (i.e I give Jenny 10 BTC)
- Get a Power of Attorney – A Power of Attorney is a document that allows the person who you appoint to make financial decisions for you in the event that you do not have capacity. For example, this means that if you were in a car accident and in a coma, someone could pay your bills and access your funds while you are alive. This is incredibly important in relation to cryptocurrencies as nobody will be able to access your finances without a Power of Attorney. This means that your crypto could sit idle in an exchange without you reaping any benefit.
- Ensure you have a list of where all your crypto is – This one is very important as nobody else may know where or what assets you hold. If nobody knows and something happens to you, how will anyone else find out about those funds? It is also important to keep a list of where your crypto is stored (i.e. exchanges or wallets) and how to access these funds.
- Have an up-to-date record of emails and passwords used on Cryptocurrency exchanges – This is very important as Cryptocurrency is a digital asset. This means no one will be able to access your account, if they do not know how to log in. You must ensure that you keep this record safe though as you do not want these accounts falling into the wrong hands.
Cryptocurrencies are an exciting and interesting asset that many people are starting to use throughout the globe. However, whilst these cryptocurrencies have value it is extremely important that you protect them, much like you would a property.
At Adams & Partners Lawyers, we have a dedicated team that can help you with all of your estate planning needs. Feel free to give us a call to have a further detailed chat.
Written by Cameron Spanner.