The cryptocurrency arrives in Texas

Cryptocurrency is finally accepted in the world of real estate planning. It has just received a major boost in Texas with the enactment of HB 4474, the virtual currency bill. Sure you can’t ignore the cryptocurrency, with its $ 2 trillion valuation, but you probably want to be cautious for now.

Here is an abbreviated explanation. The cryptocurrency is digital cash. It is done using a blockchain, which is the name of the basic technology. A blockchain is a distributed ledger that is verified by a peer-to-peer network.

There are many types of cryptography, including Bitcoin, Litecoin, Ethereum, Ripple, Stellar and NEO. The owner keeps the encryption in a “wallet”, which is kept offline or online, which is accessed via a blockchain address and a private key.

An owner can perform a transaction with their encryption through the blockchain. Once a transaction has been added to the blockchain, it cannot be modified. Because the blockchain is performed over the network, there is no central participant.

To access the encryption stored in an owner’s wallet, you must have the blockchain address and private key. An owner can have numerous blockchain addresses to help preserve privacy.

Which brings us to real estate planning. Crypto is a digital asset. You cannot hold it in the palm of your hand, bury it in the back garden, or store it in the safe. Your trustee (attorney or executor) may not know you have encryption unless you tell them to. Otherwise, your investment in cryptography may go to the grave with you.

Your trustee may not be able to legally access your encryption if you do not follow the revised Uniform Fiduciary Access to Digital Assets Act. You must provide your trustee with written access to your digital resources. However, to access the assets, your trustee must provide at least a written request, a copy of your will, trust or power of attorney, and information linking to your digital account.

If you have a real estate plan based on trust, you may have additional issues. Most trustees and custodians of traditional assets have not been willing to accept virtual currency in a trust. On the other side of the transaction, most online trading companies do not support trust accounts.

All of this may change in Texas with the new law, which allows Texas ’216 state-owned banks to provide custody services for virtual currencies.

The question remains how to finance an account or trust with cryptocurrency. There is no universally accepted method, but suggestions range from sending the encryption to your administrator’s online wallet account to transferring your private key to a secure physical device and delivering it. The new Texas law will likely lead to some new methods.

This is not to say that cryptocurrency is a good investment for a retiree. The value of cryptography varies greatly, making it a risky investment for many portfolios.

To date, the U.S. Treasury and Internal Revenue Service treats virtual currency as property and applies existing laws to it. The 2014-21 notice is the most recent targeting and is not helpful. It does not, for example, explicitly address the tax consequences of gift transactions, equity, and transaction generation of a cryptographic transaction. Meanwhile, the SEC is still trying to decide whether cryptocurrencies are unregistered securities.

So will you have to dive into the cryptographic waters? It’s up to you, but from a real estate planner’s point of view, the water still looks pretty murky.

Virginia Hammerle is president of the law firm Hammerle Finley. She is an accredited real estate planner and has been certified by the civil law board for 25 years. She has also been recognized as a super lawyer for the past ten years. She blogs regularly on topics of old age and the law. e-mail legaltalktexas@hammerle.com for your monthly newsletter. This column is for general information only and does not constitute legal advice.