Earlier this year we wrote about the National Defense Authorization Act for Fiscal Year 2021 (H.R. 6395)…
Even those who pay only passive attention to financial news cannot help but have heard that the value of Bitcoin has spiked. The flagship cryptocurrency hit a year low of $4,748 in mid-March of 2020 then, despite US-China tensions, Brexit, and the global health crisis, began a meteoric rise that saw its value hit nearly $30,000 by the end of the year.
Through 2021 Bitcoin’s value has continued to rise, hitting over $50,000 by mid-February and reaching a peak of more than $63,000 by mid-April. While this rush has since plateaued, Bitcoin’s gains have driven the rise in other cryptocurrencies’ values as well. Naturally, this rapid growth has caught a lot of people’s attention.
Not long ago, the popular view on cryptocurrencies was that they are risky in the extreme and a fringe idea. Now, with major investors like Elon Musk asserting strong support (despite his recent wavering on Bitcoin) and large companies like PayPal adopting their use, it seems like mainstream acceptance is near. Many people are understandably thus wondering what, exactly, cryptocurrency is and whether they should be buying in.
What is Cryptocurrency?
Many different cryptocurrencies exist and yet they all share in being a digital currency that uses blockchain technology to create a decentralized, immutable, public digital ledger. It is a gross oversimplification but an easy way to think of them is as unique pieces of code that cannot be replicated or changed and which are distributed through an encrypted digital network. Like any currency, cryptocurrencies gain their value based on supply, demand, and utility. Their attraction, among other things, lies in the privacy they provide, the lack of regulatory reporting requirements, and greater resistance to cyberattacks as compared to traditional financial holders like banks.
Should I Invest in Cryptocurrency?
There is no simple answer to this question as it depends on a wide range of personal factors such as financial position, age, and risk tolerance, among others. With crypto exchange Coinbase now a publicly listed company worth $58 billion and Goldman Sachs and Morgan Stanley announced plans to offer access to crypto funds, it may seem like cryptocurrencies are a safe investment and yet security concerns and simple misunderstandings resulting in major losses abound. One certain thing, however, is that if you do invest in cryptocurrency, you will want to sit down with an experienced estate planning attorney to both ensure that your investment does not trigger adverse consequences for your estate and can be securely passed on to beneficiaries when you die.
How Can Cryptocurrency Be Incorporated in Your Estate
The IRS currently treats cryptocurrency as property, not currency for tax purposes. This means that the same principles apply to your Bitcoin wallet as to your baseball card collection. When incorporated into your estate, then, cryptocurrency assets must be treated as property and not as conventional fiat currency. This said, one advantage of cryptocurrency where estate administration is concerned is that it can be passed on to loved ones without the procedural hurdles of traditional financial accounts. This presents natural advantages but also carries risk insofar as the executor of a cryptocurrency account is subject to less oversight than they would be when handling traditional assets.
Detailing the specific legal tools available for incorporating cryptocurrencies into your estate planning is beyond the scope of the present article. However, if you would like to learn more or address any other issues related to protecting your assets, do not hesitate to reach out to the Law Firm of Christopher W. Dumm either by calling us at 417-623-2062 or using the contact form on our website.
Contact the Estate Planning Attorneys at the Law Firm of Christopher W. Dumm