August 21, 2015

As of this writing, the IRS views bitcoins as property. The digital currency has gained enough traction that the IRS has started to pay attention. Now, owners of bitcoin are responsible for recognizing loss or gain and filling out taxes and W-2s where necessary as a result. 

To include bitcoins in your planning, follow these steps:

1. If the value has experienced any “step up” since you have acquired it, holding on to the bitcoins could help to cover tax consequences upon a sale. If the value has decline, an immediate sale might be the best approach for handling the loss.
2. Discuss the existence of any bitcoin assets with your beneficiaries; without a conversation, some might not even realize it exists!
3. Just as you have shared the existence information with your loved ones, you should also communicate how this can be accessed. Share those details with your executor. A power of attorney might be necessary to aid the executor with access, so look into that with your estate planning attorney.

As with all digital assets, it pays to be educated about how the asset is treated and what options you have for passing it along. Work with a law firm that understands the changing landscape of digital assets and currency so that you can feel confident in your planning.