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Should NFTs Be Included in My Estate Plan?

June 1, 2022

Although NFTs are considered “a new kid on the block,” many experts predict that they will become mainstream and valuable in the future. These credible forecasts are accelerating the popularity of NFTs (NFT sales up 38,000% year-on-year according to DappRadar). The rapidly developing popularity of NFTs is also confirmed by their impressive price tags – for example, Beeple's image collection sold for over $69 million! Some are purchasing NFTs for their own amusement, while others see them as a worthy investment. The question is whether they should be included in one’s estate plan.

Let's start with the basics: what is an NFT? NFT stands for "Non-Fungible Token" and, in simple terms, is digital content (images, music, sounds, illustrations, videos, etc.) created on a blockchain (usually on Ethereum) and available with a unique piece of code. In short, it is a unique digital work of art. There are many articles on the internet discussing in detail these non-fungible tokens. For the purposes of this post, here are some characteristics of NFTs that make them potentially great investments and worthy of being included in your estate plan:

  • They are secure. Thanks to blockchain technology, NFTs cannot be counterfeited. This reliability factor adds value to this innovative type of investment.

  • Easy to trade. There is no need for a third party to verify the authenticity of the token. There is also no intermediary institution (such as a bank or broker) involved, so NFTs can be transferred directly from the seller to the buyer.

  • Quick to liquidate. The digital form of NFTs allow the parties to complete transfers of ownership within seconds. This fast transfer capability arguably increases the volatility in the value of tokens, but also contributes to their popularity.

As with any other collectible, an NFT may increase in value over time and prove to be a great investment. If you're familiar with NFTs, and own any, should you include them in your estate plan? Absolutely. How? This is the tricky part. In general, here are 3 main guidelines to consider:

1. Keep a clear record of what NFTs you own.

Just like an investor of tangible collectibles, an investor of non-fungible tokens must keep a record of when, what, and for how much each token was purchased for. Proper record-keeping ensures that capital gains/losses taxes are correctly calculated if the collectibles are sold at some point.

2. Share NFT access information with a trusted person.

Even if you have included your NFTs in your trust, someone must have information on how to actually access your tokens once they are transferred (e.g., the password and private key to the NFT). Sharing this information with your estate planning attorney or other fiduciary is a wise decision. Without this information known to the future owner of this intangible property, the investment may be lost forever.

3. Describe the transfer procedure.

The procedure for transferring each token to beneficiaries should be sufficiently described. Because there is no central source to verify ownership of NFTs, you should not use a general, blanket statement to transfer these types of investments in your estate planning documents. Each token must be identified and listed, and the procedure for transfer should be clearly defined.

My Office Can Help You Plan Ahead

If you have questions regarding the inclusion of your non-fungible tokens in your real estate plan, Click here to Schedule a FREE Virtual Estate Planning Session. We will guide you through the entire process and help you understand what needs to be done to ensure your loved ones are taken care of.


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