To help! My dad invests in cryptocurrency – Monterey Herald


Q. My father is, and always has been, a brilliant man. Despite his age, he keeps fit both mentally and physically. We hope he will live forever! That said, I will be the representative of his estate and here is what worries me. My dad invests in cryptocurrency! I don’t know anything about it and, frankly, I’m not interested in learning. I think it’s a passing fad. When he dies and I am responsible for distributing his estate to my siblings, do I address the crypto? To help!

A. Your pop sounds wonderful, I hope you enjoy every moment you have with it. I also hope that some of those moments will be spent discussing his cryptocurrency investments. Crypto or digital currency (the terms are interchangeable) is not a passing fad. In fact, it seems that we as a society are moving towards digital currency as a powerful alternative buying and investing tool. Currently, there are over 8,000 types of digital currencies available, representing billions of dollars in assets.

Using secure ledger transactions mirroring crypto or digital currency, you can buy a Tesla, an airplane, and even real estate. The OCC (Office of Controller of Currency), which regulates banks, recently issued regulations allowing banks to hold digital assets and Visa is developing a credit card that allows a consumer to spend digital money through a credit or debit card.

The IRS now requires holders of digital currency to report any income or capital gains realized on the sale of the currency and taxes will be assessed as they are on more traditional forms of investment. You will see questions on your 1040 personal tax return asking if you hold or held crypto or digital currency. So, as you can see, we all need to familiarize ourselves with this new form of legal tender. He is here to stay.

As a trustee, the person who will be responsible for the distribution of your father’s estate, you will be responsible not only for including the digital assets in the estate for inheritance tax reporting, but also for how to manage the liquidation and/or distribution of assets. .

When your dad buys crypto, he receives a digital key. Normally, this is a string of numbers, symbols, and letters that represent his asset on the secure ledger. The key is irreplaceable and if it is lost, its assets are also lost. I hope he keeps the key in a safe place!

Your first step is to speak with your dad about his crypto investments to find out what kind of currency he holds and where the key is kept. When the time comes to settle his estate, you will value the assets as of the date of his death and then sell the currency or distribute it to his heirs. If your father’s estate exceeds $12.06 million, estate tax will be due on all of his assets, including crypto.

While the world of digital assets is somewhat new and evolving, estate planning lawyers are including language dealing with these types of assets in their documents, or at least they should be. That said, it’s worth making sure their estate plan is written in such a way that they can manage their digital assets when the time comes.

Cryptocurrency is the best of both worlds and I encourage you to learn as much as you can from your father so that you can effectively perform your duties as an estate representative.

Liza Horvath has over 30 years of experience in the areas of estate planning and trusts and is a licensed professional trustee. Liza is currently President of Monterey Trust Management. It is not legal or tax advice. If you have a question, call (831) 646-5262 or email [email protected]


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