b'Tales from the Crypt(o): Estate Planning for Cryptocurrency AlertsKelsey M. Scanlan Clearly identify the existence of any cryptocurrencies in 612-877-5320|Kelsey.Scanlan@lawmoss.com 1 New Remedies to Combat Revenge Liens LawMoss.com/people-kelsey-m-scanlan all planning documents (e.g., wills, trusts, and powers of attorney).Recent amendments to the Uniform Commercial Code (codified as Minnesota Statutes, Chapter 336) Kelsey is a member of our Wealth Preservation and Estate Planning group. She represents individuals and families in estate planning andGrant fiduciaries explicit authority to access and transfer digitalprovide an immediate remedy for lien notices (financing statements) filed with the intent to harass the administration of estate and trust matters. assets in all planning documents.or defraud a debtorknown as revenge liens. The filing system the Minnesota Secretary of Provide fiduciaries with detailed instructions about howState utilizes creates a public notice of liens against a debtors personal property upon the filing Mainstream interest in cryptocurrency has skyrocketed overof a financing statement. Previously, there was no way to challenge a financing statement filed the last few years. Despite digital currencies plummeting nearlyto access the digital accounts.with ill intent other than through the civil court system. A disgruntled party could abuse the $2 trillion in value since peaking in late 2021, the marketSimply put, crypto investors must not only inform family membersfiling system to file a bogus lien against an employer, spouse or domestic partner, vendor, government official, or professional to continues to grow. As of May 2022, one in five Americansand fiduciaries that crypto accounts exist, but they must alsocause embarrassment or financial disruption. Changes to the Uniform Commercial Code now empower the Minnesota Secretary of invested, traded, or used cryptocurrencies. An estimatedexplain how to access the digital accounts to those who will beState to reject a filing based on an affidavit of wrongful filing from the debtor. The amendments provide an alternative to the court 46.5 million more Americans are expected to invest inhandling their affairs. process and a more efficient response to revenge liens. If you need assistance navigating this process, please contact your attorney cryptocurrencies for the first time this year.at Moss & Barnett. Fiduciary Considerations For those entering the cryptocurrency market, updating estate planning documents may not be top-of-mind. But incorporatingMost states, including Minnesota, have adopted some form of the this complex asset class into an estate plan is imperative to protectUniform Prudent Investor Act, which requires trustees to invest and eventually gift this unique investment.and manage assets in a reasonably prudent manner. Because the value of cryptocurrency is notoriously volatile, investments are2 New Businesses Beware of Solicitation Scams Accessibility Issues risky. As such, it is very challenging for fiduciaries to comply with In 2021, an estimated 20% of then-existing Bitcoin, worththeir duty to act as a prudent investor when an estate or trustDeceptive and misleading solicitation letters are on the rise and often target approximately $140 billion, was lost or stranded in digital wallets.contains cryptocurrencies. newly registered businesses. Scammers frequently pose as government entities, The same features that make cryptocurrency appealing including the Secretary of State, or refer to laws, like the Uniform Commercial The significant risk of liability involved with managingCode, to trick unsuspecting business owners into providing confidential security, anonymity, and decentralizationincrease the risk thesecryptocurrencies makes many fiduciaries reluctant to serve. To assets will be lost without advance planning.reduce risk and alleviate hesitation, estate planning documentsinformation or paying fees for unnecessary services. Scam solicitation letters should provide fiduciaries with clear authority to retaintypically include legal jargon, fake deadlines by which a response is required, Cryptocurrency exchange companies do not allow ownerscryptocurrency and indemnify fiduciaries to the greatest extentand a demand for fees related to compliance or reporting requirements. Do not to make pay-on-death beneficiary designations. In fact, verypossible for doing so.fall victim to a solicitation scam. When in doubt, contact your attorney at Moss few companies have implemented official procedures for the& Barnett to verify any requests for payment or information, even when such collection and transfer of assets upon death. To prevent digitalTax Implications requests appear to be from an official source. assets from disappearing at death, crypto investors should take the following initial steps: The IRS classifies cryptocurrency as property for federal tax purposes. Every purchase, sale, or exchange of cryptocurrency Talk to an estate planning attorney about existing cryptocreates a potential taxable event that must be reported to the IRS. investments and any plans to purchase additionalSuch treatment may result in substantial income, gift, and estate tax cryptocurrencies.implications for the inclusion of cryptocurrencies in an estate plan. If you would like assistance assuring best practices in these areas, please contact your attorney at Moss & Barnett.2 "Tales from the Crypt(o):" Continued on Page 9 3'