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Brett Arends’s ROI: Protecting your bitcoin billions from Uncle Sam

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There’s exciting news from the worlds of wealth management, estate planning, tax avoidance and cryptocurrencies.

A new professional service out of Wyoming can make sure your bitcoin
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billions or $100 million in “non-fungible tokens” pass to your heirs with the minimum of risk, fuss and, yep, federal, state or other taxes.

This assumes, of course, that the digital currency mania—currently valued at around $2.4 trillion, or roughly as much as the entire German stock market — lasts longer than you do.

Not everyone is convinced.

“The IRS is going to view anyone’s digital asset holdings, whether it’s cryptocurrencies, NFTs etc., as property in the same way that they will view your stocks, or art, or wine,” explains Joel Revill, a former Wall Street banker now running Wyoming-based wealth management company Two Ocean. A so-called COIN Trust, created by his company in partnership with crypto asset “custodian” Anchorage Digital, will “ensure that your wealth is passed on with clear instructions to your rightful heirs in a safe, expeditious and tax-optimized manner.”

COIN Trust stands for “Crypto-Optimized Irrevocable Non-Grantor” Trust.

The service involves everything from putting your cryptocurrencies into a trust, and locking access behind biometric keys, to “domiciling” them in ultra-libertarian Wyoming to take advantage of the state’s low, low taxes and strong privacy laws.

As Anchorage Digital’s Nathan McCauley says, new crypto tycoons are saying “we don’t want to generate all this wealth, and spend all this time generating all this wealth, just to have it all disappear if something terrible happens to me or my family.”

Every boom generates another boom in picks, shovels and other ancillary services. Levi Strauss & Co.,
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which started out making jeans for California gold prospectors, built a far more enduring fortune than most of the actual, er, gold prospectors.

Meanwhile cryptocurrency enthusiasts haven’t yet agreed on the purpose of these currencies.

Some say cryptocurrencies are protection against “inflation.” Yet while the currencies are booming, there is no inflation. Nor are other inflation hedges, such as gold, real estate, or inflation-protected Treasury bonds, booming either.

Bitcoin is up 500% in the past year. Forecast inflation: 2.6%.

Some say crypto is a protection against the collapse of the dollar — a collapse that the currency markets, so far, haven’t noticed.

Some say crypto is a protection against a broader financial collapse. Cryptocurrencies will be a great, durable currency in the coming apocalypse, they argue—just so long as the apocalypse doesn’t affect the computers, internet, mobile networks or electrical grid on which cryptocurrencies depend.

Still others say crypto will offer cheap financial services to the “unbanked” — those millions around the world, from impoverished, undocumented migrants and refugees to Afghan goat herders. Such people apparently do not trust traditional financial systems, and cannot afford to open a bank account, but will keep their meager savings in highly unstable currencies on their brand-new iPhone 12.

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