One common bundle of myths about cryptocurrency is, “My coin is creditor proof because it’s secret and no can find it and only I have the key.” Here’s why that’s false and why you shouldn’t hold crypto in your own name:
Any strategy that relies on “secrecy also relies on your willingness to commit “perjury” and lie about the existence or value of your holdings in a debtor’s exam, deposition, or similar sworn testimony.
Any U.S. court that has jurisdiction over you and your assets can order you to tender the assets to satisfy a judgment, this includes access to your crypto wallet.
Your crypto assets are discoverable through a variety of methods including your tax returns, where you have a legal duty to report crypto profits to the IRS.
Failure to report crypto gains is criminal tax evasion and that includes holdings you may be holding through an offshore trust, LLC or similar device. Some physicians have been targeted by marketing that pitches such schemes as being secret, tax free and creditor remote — they aren’t.
How do you hold title?
Crypto assets held in your own name are subject to all your personal and professional liabilities, just like all your other liquid assets. As such, holding your coin through a properly structured legal entity that is legally distinct from your unrelated risks is best practice. Some commonly used holding structures include LLCs, limited partnerships, and irrevocable trust structures. Long term investors can also consider making their crypto holdings an exempt asset by