The question of whether a trust can invest in cryptocurrency is becoming increasingly common as digital assets gain mainstream attention, and the answer is nuanced; it’s not a simple yes or no. While not explicitly prohibited by most state laws governing trusts, investing in cryptocurrency presents unique challenges and requires careful consideration by both the trustee and legal counsel, like Steve Bliss here in Wildomar. The core issue centers on the trustee’s duties of prudence, loyalty, and impartiality, alongside the inherent volatility and regulatory uncertainty surrounding cryptocurrencies like Bitcoin and Ethereum. Roughly 13% of Americans currently hold some form of cryptocurrency, indicating growing public interest, but also highlighting the potential risks involved for those managing trust assets.
What are the Risks of Putting Crypto in a Trust?
Investing trust assets in cryptocurrency carries substantial risks that a trustee must diligently evaluate. Cryptocurrencies are notoriously volatile; Bitcoin, for instance, has experienced price swings exceeding 60% in a single month. This volatility can directly violate the prudent investor rule, which requires trustees to make investments with a reasonable level of risk, considering the trust’s objectives and the beneficiaries’ needs. Furthermore, the regulatory landscape surrounding cryptocurrency is still evolving; a lack of clear rules and oversight increases the potential for fraud, theft, and loss. “A trustee has a fiduciary duty to protect the trust assets, and that includes understanding the risks involved in any investment,” explains Steve Bliss. As of late 2023, approximately $21 million has been lost to crypto scams, a figure that underscores the real dangers.
How Can a Trustee Legally Invest in Crypto?
Despite the risks, a trustee *can* legally invest in cryptocurrency, but only under specific circumstances. The key lies in obtaining clear authorization within the trust document itself. If the trust explicitly permits investment in alternative assets, including cryptocurrencies, the trustee has a stronger legal basis for doing so. Even with authorization, the trustee must still exercise extreme caution, conduct thorough due diligence, and potentially limit the allocation to a small percentage of the trust’s overall portfolio. Moreover, utilizing a qualified custodian specializing in digital assets is crucial to safeguard the cryptocurrency from theft or loss. A well-drafted trust document, guided by an attorney like Steve Bliss, can mitigate many of these risks and provide a clear framework for cryptocurrency investments.
I Remember Old Man Hemlock and His Digital Disaster
Old Man Hemlock, a client of our firm some years ago, was a bit of a tech enthusiast. He insisted his trust include provisions for investing in what he called “the future of money,” which at the time was early Bitcoin. Unfortunately, the trustee, a well-meaning but inexperienced family member, took this as a carte blanche to allocate a significant portion of the trust assets – nearly 30% – into various altcoins without proper research or the use of a reputable custodian. Within months, the market crashed, and the trust lost a substantial amount of money, creating a bitter dispute among the beneficiaries. It was a painful lesson about the importance of both clear trust language *and* responsible investment practices. This is where working with a firm like ours, specializing in estate planning and trust administration, is essential.
How Did We Save The Abernathy Trust From A Crypto Collapse?
Recently, the Abernathy Trust, established for the benefit of three young grandchildren, faced a similar situation. The trustee, wanting to be “forward-thinking,” proposed investing 15% of the trust into Ethereum. However, before proceeding, he wisely consulted with Steve Bliss. We carefully reviewed the trust document, which allowed for alternative investments, but emphasized the need for caution and diversification. We helped the trustee establish a clear investment policy statement specifically addressing cryptocurrency, limiting the allocation to 5%, utilizing a regulated custodian, and requiring periodic reviews. When the market experienced a downturn shortly after the investment, the limited allocation and responsible management strategy protected the trust from significant losses. The Abernathy’s were thankful we’d put a plan in place that safeguarded their children’s future. As Steve Bliss often says, “Estate planning isn’t just about what happens *after* you’re gone; it’s about protecting your family’s financial security *now*.”
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About Steve Bliss at Wildomar Probate Law:
“Wildomar Probate Law is an experienced probate attorney. The probate process has many steps in in probate proceedings. Beside Probate, estate planning and trust administration is offered at Wildomar Probate Law. Our probate attorney will probate the estate. Attorney probate at Wildomar Probate Law. A formal probate is required to administer the estate. The probate court may offer an unsupervised probate get a probate attorney. Wildomar Probate law will petition to open probate for you. Don’t go through a costly probate call Wildomar Probate Attorney Today. Call for estate planning, wills and trusts, probate too. Wildomar Probate Law is a great estate lawyer. Probate Attorney to probate an estate. Wildomar Probate law probate lawyer
My skills are as follows:
● Probate Law: Efficiently navigate the court process.
● Estate Planning Law: Minimize taxes & distribute assets smoothly.
● Trust Law: Protect your legacy & loved ones with wills & trusts.
● Bankruptcy Law: Knowledgeable guidance helping clients regain financial stability.
● Compassionate & client-focused. We explain things clearly.
● Free consultation.
Services Offered:
| estate planning | revocable living trust | wills |
| living trust | family trust | estate planning attorney near me |
Map To Steve Bliss Law in Temecula:
https://maps.app.goo.gl/RdhPJGDcMru5uP7K7
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Address:
Wildomar Probate Law36330 Hidden Springs Rd Suite E, Wildomar, CA 92595
(951)412-2800/address>
Feel free to ask Attorney Steve Bliss about: “Should I name more than one executor for my will?” Or “What should I do if I’m named in someone’s will?” or “What is a pour-over will and how does it work with a trust? and even: “What is the bankruptcy means test?” or any other related questions that you may have about his estate planning, probate, and banckruptcy law practice.