The meteoric rise of cryptocurrencies has minted a new generation of millionaires and resulted in the mainstream adoption of virtual currencies as an increasingly important asset class. The crypto boom has also raised questions on how miners/stakers, investors, and other players can best transfer these digital assets to their heirs from a tax and estate planning perspective. For example, how do you ensure your heirs can control and inherit a virtual asset that, by design, has no personal identifying information and requires a passcode to access after you pass away? What are the estate and federal income tax implications of an inheritance of crypto assets that may have substantially appreciated at the time of transfer? Are there ways to minimize federal gift and estate taxes on the transfer of digital assets? We cover these questions and other issues further below.

Protecting Crypto Assets

For traditional assets like real estate or stock brokerage accounts, there is typically a certificate or another legal document identifying the owner of such assets. By contrast, cryptocurrency networks are largely decentralized, meaning users conduct and police financial transactions occurring within the system rather than a centralized authority.

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