Protecting Cryptocurrency

Cryptocurrency has literally exploded onto the scene and created an entire new asset class.  Just 2 years ago only a handful of my clients had any crypto based assets.  Today I would estimate that at least 50% of my clients hold some form of blockchain based asset.  I have also been asked several time "Isn't crypto somehow already protected, do I really need to add my crypto to my plan?"  The answer to that is a big YES - you do need to add your cryptocurrency to your asset protection plan.  It is not protected just because it is a digital asset and easy to move.  You must take steps to protect it, just like any other asset you have.

So how can you add these assets to your Asset Protection Plan?  Cryptocurrency is not like a normal bank or brokerage account, which is held at an institution and can be transferred into the name of your Asset Management Limited Partnership.  Cryptocurrency is held in a wallet, represented by a long string of numbers and can be maintained in any number of ways from a physical device you keep at home to the cloud.  For this reason, you cannot simply call your Crypto Broker and change the name to your AMLP or Bridge Trust.  

Cryptocurrency may also be held at an 'exchange' like Coinbase or Gemini. These exchanges hold your wallet for you and then you have access through a traditional username and password.  This makes it seem similar to having a bank account, but it is not.  And because the Crypto space is so new, the exchanges also have many limitations.  

These limitations and regulations will continue to change rapidly over the next few years, and we will continue to update our advice accordingly.  As of now; however, the best option for protecting your Crypto is to assign your wallet or exchange account to your AMLP or Bridge Trust. 

For most of my clients, the Bridge Trust is the better choice.  This is because in most cases, your Crypto was purchased with reference to your personal name and social security number.  Since the Bridge Trust is a "Grantor" Trust, it also uses your personal social security number as its tax identification number.  This makes it an easy match to assign your crypto to the Bridge Trust for tax reporting.

Assigning Crypto to your AMLP is also good.  This would be a better choice in the event you did not yet have The Bridge Trust, or if your accountant prefers to do the accounting on the AMLP return.

While an assignment is likely the best choice for most situations, if you have any questions about protecting crypto, please do not hesitate to contact us directly at [e-mail] to get specific advice.  You may also download the attached Assignment Forms for your AMLP and Bridge Trust.  Please make sure to send us a copy for your file when you have completed it.