Being an early adopter of new technologies such as cryptocurrency can create opportunities to make money before the rest of the world catches on. Yet, it can also create issues when the authorities are still deciding how to regulate it. If you are one of the estimated 11% of Americans who own cryptocurrency, you could be affected by future decisions the Internal Revenue Services (IRS) make about taxing it.
The IRS currently treats cryptocurrency as property, not funds
Profits you make when trading cryptocurrency are currently subject to capital gains tax. If you sell currency within a year of buying it, the IRS will tax it like ordinary income. If you have not declared all your transactions, you may find the IRS presents you or your family with a massive bill in the future if they decide to investigate. It has taken some cryptocurrency providers to court to force them to release details of people’s transactions.
Ensure your family can access your cryptocurrency when you die
One of the disadvantages of such a secure and untraceable finance system is that you could inadvertently prevent your family from ever accessing your fund when you die. They may never know it exists, let alone how to access it. You will need to provide them with the virtual keys to your account, explain how it works and include it in your will.
Cryptocurrency is just one of the digital assets you need to include as part of your estate plan. An attorney can help you understand the best way to do so per the latest laws. They can explain how to comply with California’s Revised Uniform Fiduciary Access to Digital Asset Act to make it easier to transfer your digital assets to your family.