Cryptocurrency is treated like any other asset in a person's estate. Depending on the estate planning measures one undertakes, digital currencies may or may not go through probate, a legal administrative process that verifies the will and settles the estate. Below, learn more about this subject and how it can impact your estate planning arrangements.

What Happens to Assets When They Enter Probate?

One of the ultimate goals of probate is to disperse the assets in an estate to the appropriate beneficiaries. The representative is the administrator of the estate, usually appointed by the decedent. The representative must locate and take possession of all the decedent's assets so they can be protected during the probate process. 

This can be complex and time consuming, as some people own assets that they haven't included in their will. The assets remain in a sort of legal holding pattern, undistributed but protected by the probate courts, until everything has been accounted for and included in the overall estate.

What Happens to Cryptocurrency?

In addition to the time involved in inventorying all the assets in an estate, the legal procedural steps of probate can also require a significant amount of time. Depending on how long it takes to locate evidence of a loved one's assets, the currency could end up losing some of its value. Digital currencies can fluctuate over time, which means that the funds you hold in your name may not be worth as much once the probate process plays out. 

 How Can I Protect Cryptocurrency From Probate?

Fortunately, you have options for minimizing the effects of probate on your cryptocurrency. All estates should have wills that name beneficiaries to receive the digital currency, as well as how to access the funds. This will help streamline part of the probate process and ensure the funds get to the intended beneficiaries.

You can avoid probate entirely by leaving cryptocurrency in a living trust. You place ownership of specific assets into the trust itself while you are still alive. Then, upon your death, those assets transfer to the appointed beneficiaries, without having to be submitted to the probate courts or the processes therein.

Comprehensive estate planning should include preparations for your cryptocurrency. David R. Webb, Attorney at Law is here to help. With more than 30 years of legal experience, he represents clients throughout the Lincoln, NE, area in estate and probate issues. Call (402) 477-7577 to schedule a consultation for legal advice or visit his website to browse his services.