The ascent of cryptocurrencies as a new asset class has presented novel challenges for estate planning and inheritance. This article seeks to address the question: "Can cryptocurrencies be inherited?"
Cryptocurrency Inheritance: A New Frontier
Cryptocurrencies, by their digital nature, pose unique obstacles for heirs and executors. Unlike traditional assets, digital assets often lack a paper trail, are subject to encryption, and may require certain technical knowledge to access. However, in terms of legal structures, the same rules that apply to traditional assets generally apply to cryptocurrencies.
U.S. Federal Law and Cryptocurrency Inheritance
There is no federal law in the United States explicitly addressing cryptocurrency inheritance. However, the Internal Revenue Service (IRS) treats cryptocurrencies as property for tax purposes. This means inherited cryptocurrencies may be subject to estate taxes.
The exact tax obligations will depend on several factors including the value of the deceased's total estate and the cost basis of the cryptocurrencies. The cost basis changes from the original purchaser's acquisition cost to the fair market value at the time of the original owner's death, a concept known as "step-up in basis."
Missouri Law and Cryptocurrency Inheritance
Missouri, like many states, does not have specific laws about cryptocurrency inheritance. However, it does have laws about property and inheritance that would apply to cryptocurrencies.
The Missouri Probate Code oversees the transfer of property after someone's death. According to this code, digital assets such as cryptocurrencies would fall under personal property and would be subject to distribution just like other personal property assets.
However, the accessibility of these assets can be a significant issue. If the decedent did not leave behind access keys or other crucial information for accessing the cryptocurrency, retrieving these assets could be technically challenging or even impossible.
Estate Planning for Cryptocurrency
For cryptocurrency holders, proactive estate planning is vital. Key measures can include sharing the details of your crypto assets and how to access them with a trusted person or incorporating them into a will or trust.
While the legal framework for cryptocurrency inheritance is still evolving, these digital assets can be inherited under current laws. However, the technical challenges of accessing inherited cryptocurrencies underscore the importance of thorough estate planning. As always, seeking professional legal advice can help navigate this complex terrain.