With the rise of Bitcoin’s value, more and more people are taking the cryptocurrency seriously as a method for storing wealth. Some analysts believe that a single Bitcoin will be worth $1 million in the not-to-distant future, while others believe that the coins will be worth no more than $0 dollars in a matter of years. Regardless of your opinion, if you own Bitcoin, you will want to make sure you create a strategy for transferring your crypto coins to heirs in your estate plan.
Perhaps the most interesting thing about cryptocurrencies in terms of estate planning is the way that they can be lost forever. If someone dies but doesn’t leave instructions to heirs regarding how they can gain access to the coins, then potential heirs will not have any way of accessing the coins. Indeed, as every cryptocurrency investor knows, these coins are often held by individuals independent of banks — so there is no authority to which heirs can appeal to open up a cryptographic wallet. These digital lockboxes cannot be accessed without the cryptographic keys — not by anyone.
Legislation has also not caught up to the cryptocurrency craze. This means that there are a lot of unanswered questions about digital coin inheritance. However, in some cases — particularly if the coins are held by a centralized exchange like Coinbase, for example — heirs might be able to provide estate documentation and a death certificate to access and transfer their loved one’s store of coins. However, if the coins are stored in the individual’s private digital wallet, heirs will be out of luck without their loved one’s cryptographic keys.
Because everything remains undecided about cryptocurrencies, estate planners who own them in California may want to create a plan that is completely independent. Think of your crypto cons as if they were gold buried in your backyard. If you don’t give heirs access to a map and complete instructions, they won’t have any way to get the gold when you’re gone. Perhaps one solution would be to store clear instructions on how to access your coins in a safety deposit box that your loved ones will gain access to after you have passed.
If you own cryptocurrencies, be sure to stay apprised of the latest legal developments. Also, make sure you investigate different inheritance planning strategies you can employ regarding your coins.
Source: Bloomberg, “Bitcoin Industry Grapples With Age-Old Problem of Inheritance,” Nate Lanxon, Feb. 13, 2018