The very nature of how the increasingly popular cryptocurrencies are held by their owners creates issues in estate planning, according to the New Jersey Law Journal in "Estate Planning in the Age of Cryptocurrency."
Why is it a challenge? It is because proof of ownership is nothing more than possession of a digital key. Anyone who has the key can access the cryptocurrency. This means that it is not a good idea to write the key down in a will that could be made public during the probate process.
One of the biggest issues is taxation. Despite having "currency" in its name, cryptocurrencies are not treated as currency for tax purposes. They are instead treated as property. This has important implications for how these assets should be treated in an estate plan, to minimize any taxes that must be paid by the estate or potential heirs.
Another issue is how the cryptocurrency should be transferred. Owners need to decide whether it should be given to heirs as cryptocurrency or whether it should be sold and given to heirs at its cash value.
An estate planning attorney can advise you on creating an estate plan that fits your unique circumstances and may include cryptocurrencies.
Reference: New Jersey Law Journal (April 23, 2018) "Estate Planning in the Age of Cryptocurrency."