Who Gets My Bitcoin (And Other Blockchain Assets)?
The rise of digital assets such as bitcoin raises a number of questions, such as how to tax and regulate them. And then there are estate planning implications to consider. This article takes a very fast look at recent US developments.
This publication has looked at the tax aspects of bitcoin and other digital assets, and there are also inheritance aspects to consider. In this article, which considers the US aspects of such cases, Matthew Erskine, managing partner, Erskine & Erskine, examines what issues people need to take into account.
This brief commentary is a taster of the kind of estate planning problems that can arise, and scratches the surface. The editors of this news service hope that more wealth management professionals who are involved in digital assets will want to comment and add to debate. Email email@example.com and firstname.lastname@example.org
A virtual currency guidance and advisory issued by the US Treasury Department’s anti-money laundering (AML) unit clarified regulatory expectations, riled some cryptocurrency players and signaled a potential new global standard for combating financial crime.
-- The statement added that the guidance “does not establish any new regulatory expectations” and “consolidates current FinCEN regulations, guidance and administrative rulings";
-- FinCEN has broad international reach to any business doing substantive business with US persons and therefore international businesses need to be paying attention if they source cryptocurrency from US exchanges or interact with US consumers;
-- Any time FinCEN issues an advisory, compliance officers in both banks and virtual currency companies will spend a fair amount of time over the next few days reviewing the advisory in the context of their businesses and customers; and
-- Concerns include another round of bank account closures, not because customers are engaging in illegal activity, but because compliance officers and managers lack an understanding of the technology underlying cryptocurrencies as the easy way out rather than invest the time and effort to learn more about the space.
Although owners of blockchain-based investments most commonly hold cryptocurrrency, blockchain technology is expanding into non-currency areas. In both, however, there are risks mainly because 1) estate planners and family members are ill-informed about the presence and nature of blockchain assets, 2) clients fail to realize that wills and trusts must have specific language to allow personal representatives and trustees to manage those assets after incapacity or death, and 3) the regulatory environment, taxation, reporting, application if intestacy laws and other issues have yet to be resolved.
The best advice is to educate your estate planner and family about blockchain based assets, especially cryptocurrency, and if the value of those assets exceeds $100,000, place the assets in custody with a fiduciary or institution that has the capacity to invest the time and effort required to comply with the myriad changes as they occur.