Good afternoon, Reader,

I hope you're preparing for a spooky October. I know I am: On Monday I turn 67. To soften my yearly bout of existential dread at the contemplation of my own mortality, I’m going to spend a relaxing day at the spa and then have dinner at my favorite Italian restaurant, Café Martorano.

Three Estate Planning Horror Stories

Since it’s October, I thought we could get into the Halloween spirit with a few terrifying estate planning horror stories.

It’s not surprising that there are many, many horror stories in the estate planning world. Estate plans have so many moving parts and they intersect with so many critical areas—taxes, real estate, business, etc.—that there are virtually an infinite number of things that can go wrong.

But just like with horror films, some of these estate planning stories are more spine-tingling and heart-palpitating than others. Fortunately, unlike the clueless teenagers in a slasher film, you can avoid being a victim.

I’ve picked just three horror stories that I find especially scary. If you dare, hear tell of:

1. The Terrible Tale of the Disinherited Stepchild
2. The Frightening Fable of the Unofficial Husband
3. The Spooky Story of the Outdated Will

Cryptocurrency Taxation

Last month I discussed the unique challenges regarding estate planning for cryptocurrencies (if you missed that piece, click here to read it). Interestingly, an article was published in the July/August edition of the Florida Bar Journal that discussed another complex and misunderstood aspect of virtual currencies: taxation.

Contrary to what you may expect, the U.S. taxes virtual currencies as property, not currency. The tax status of cryptocurrency has broader implications.

Capital Gains: Gain or loss is recognized and taxable every time you sell cryptocurrencies or use them to buy goods or services.

Hard Forks and Airdrops: This cryptocurrency lingo refers to a permanent protocol change to the original “ledger,” which may or may not result in new virtual currencies on a new ledger and possibly taxable income. Coin holders may not be notified of hard forks or airdrops but would still be liable for the tax.

Fair Market Value: Calculating the fair market value can be tricky. It depends on when and how the cryptocurrency was acquired, e.g. trading platform, exchange, “on-chain,” or “off-chain”.

Basis: In short, the basis in a virtual currency is what is paid for it (plus any transaction fees). However, future transactions quickly muddy the waters. To illustrate just how quickly and how muddy it can get, let’s look at a fairly simple example from the Bar Journal piece:

That’s a lot of math for a single slice of pizza! As you can see, from an estate planning point of view, cryptocurrencies are tricky. Plus, cryptocurrency taxation (and crypto more generally) is an evolving arena, and there will likely be changes and regulations in the future. However, as more and more people dip their toes into the cryptocurrency pond, it’s important to periodically try to understand the lay of the land.

The end of the year is fast approaching, and time is running out to make updates or revisions to your estate planning documents. The overall size and scope of the changes needed will impact how long it takes to put them in place. Please call me (561-998-2362) or email me to discuss your planning documents.

Thank you, as always, for reading, and I will see you next month!

Sincerely,