Some Considerations on Estate Planning & Cryptoassets
When individuals consider using a trust structure to hold cryptoassets for asset protection or estate planning purposes, trustees should have a few things to take into account before discussing with their future clients:
Security: Beneficiaries should be aware of the trustees cryptocurrency holdings and ensure that transfers to beneficiaries are executed in a secure manner. This might include providing them with private keys or recovery phrases.
Asset consolidation: As per cryptoassets volatility, the trustees should ensure their value is regularly reviewed and encourage their clients to update their estate plan as needed to ensure that it still aligns with their goals and objectives.
Taxes:
Structure set up: Trustees should encourage their clients to consult a tax professional familiar with the laws and regulations in the trustees, settlors and beneficiaries’ jurisdictions to ensure the family’s cryptoassets estate plan is legally sound and tax efficient.
Implications: Beneficiaries may be subject to taxes on any capital gains or other income generated by the cryptoassets they receive. They should consult with a tax professional to understand their tax obligations and ensure that they are in compliance with the tax laws in their jurisdiction.
Compliance: cryptoassets are subject to various compliance regulations depending on the jurisdiction in which they are held and traded to prevent money laundering and other financial crimes. A trustee good practice may be to comply with the highest standards so most jurisdictions regulations are respected
Liquidity: Some cryptoassets may be illiquid and may not be easily converted to cash. Beneficiaries should consider the liquidity of the assets they receive and be aware of the potential challenges in selling or trading them.
Storage: Before beneficiaries receive cryptoassets, a trustees good practice may be to check how the beneficiaries have decided to store them. If required, the trustee may assist the beneficiaries in performing a solid due diligence that considers the different options available such as cold storage (offline storage) or hot storage (online storage) and most reliable service providers.
Securities regulations: Trustees should be aware that some cryptoassets, such as security tokens, may be considered securities and be subject to securities laws and regulations, which can include registration and disclosure requirements.
As the regulatory landscape for cryptoassets is constantly evolving, and compliance requirements can vary significantly depending on the jurisdiction and specific cryptoassets in question, trustees should try to stay up to date on the latest regulations and seek professional advice if necessary.
