1. Cryptocurrency is considered “property” by the IRS and is subject to federal gift and estate tax laws.
2. The federal estate and gift tax exemption amounts for 2022 are $12.06 million for individuals and $24.12 million for married couples.
3. Estate planning provisions should be designed to minimize any gift and estate tax consequences related to cryptocurrency.
4. Owners of cryptocurrency should discuss ways to minimize estate and gift tax consequences with their estate planning attorney.
5. It is important to work with an estate planning attorney familiar with cryptocurrency and the rapidly evolving laws in this field.
6. Crypto owners should document specific instructions for accessing and transferring their cryptocurrency assets to ensure they are not lost after their death.
7. A comprehensive estate plan ensures that the owner, selected fiduciaries, and beneficiaries know and control what happens to cryptocurrency assets upon the owner’s death. – Custodial Wallet: A third party, like a crypto exchange, holds the cryptocurrency. It’s convenient but comes with the risk of the funds being frozen or attacked.
– Cold Wallet: A physical storage device, like a USB drive, stores cryptocurrency offline. It’s seen as secure but can be costly and easy to misplace or steal.
– Hot Wallet: A desktop, web-based, or mobile application that stores cryptocurrency online. It’s convenient but has the risk of being hacked or stolen.
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