What Happens to my Bitcoin when I die? Estate Planning and Digital Currencies
Cryptocurrencies have gained significant popularity over the last decade, appealing to the masses due to their decentralized nature, virtual anonymity, and enhanced security. For Federal income tax purposes, cryptocurrency is treated as property, and longstanding tax principles apply to all transactions involving cryptocurrency. Thus, anyone who owns cryptocurrency should be treated like other assets and be addressed in an estate plan.
However, these currencies pose certain challenges for estate planning. Like securities, the value of cryptocurrencies can fluctuate with great volatility due to market pressures. In addition, the virtual currency cannot be kept in a physical bank account. This lack of physical presence poses issues if the holder did not properly take steps to track and pass on his or her cryptocurrency.