Who Will Inherit Your Bitcoins or Other Digital Currency?
NOTE: This isn’t really a genealogy article. However, genealogists are usually very familiar with the reasons for writing a will. Whether the information in this article applies to you or to a loved one, I will suggest that all genealogists and everyone else should be aware of this information.
Do you own Bitcoins or other cyber-currencies? Do your living parents or other family members own such digital assets? Yes, even your adult children may have digital currencies and probably have not considered inheritance issues in the case of their unexpected demise. If you or any relative who owns crypto-currencies should die unexpectedly, who gets the inheritance? Do the future heirs know how to claim and retrieve the cyber currency?
Most cyber-currency experts agree that the safest method of storing digital currencies is in a hardware wallet, such as the very popular Trezor and Ledger devices. Use of these high security pieces of hardware almost guarantees that no one can hack in and steal the valuable assets that are stored within the hardware wallet. After all, these digital wallets are usually powered off and disconnected from any computer when being used to store assets. How can a hacker steal from something that is disconnected and powered off?
Trezor Model T, a very popular hardware wallet for cryptocurrencies
NOTE: The only exposure of hardware wallets is for the few seconds the wallet is being used to add or to remove assets from the device: plug it into your computer’s USB port, add or remove funds, and then immediately unplug the hardware wallet.
As secure as the hardware wallets may be, they create a problem for potential heirs. Not only hackers but also heirs are locked out if they do not know how to access the funds. The decentralized and unregulated nature of Bitcoin and other crypto currencies means that without the keys to access a hardware wallet, nobody has any method of accessing any funds. Unlike a bank or a stockbroker, obtaining a court order, along with a copy of the death certificate, is useless with a hardware crypto wallet. Nobody, and I do mean NOBODY, knows how to access the funds if the deceased did not share that information or leave instructions behind. There is no backup copy at any corporation’s offices.
Ledger Nano S – Another very popular cryptocurrency hardware wallet
Some people store their crypto currencies online in less-secure online wallets and in online exchanges that will convert your dollars, Euros, pounds, or other government-issued currency into Bitcoins, Ethereum, Dogecoin, Monero, Dash, Ripple, and other forms of digital assets. If the funds are stored in such a service, the company that stores the assets probably (and let’s repeat that word: PROBABLY) will release the funds to a legally-recognized heir as long as they have received the court order, a copy of the death certificate, and legal proof of identification of the heir(s). That would appear to be a solution.
In fact, the solution isn’t very good at all. First of all, hackers have stolen funds in the past from online exchanges whether the owner of the funds is deceased or not. Most security experts will tell you that no one should ever use online crypto currency exchanges to store significant amounts of funds.
If you have $10 or $20 stored in an online wallet, you obviously don’t want to spend $100 or so for a secure hardware wallet! However, if you have significant funds to be stored, a hardware wallet is considered to be a “must have.” Next, the exchanges in different countries obviously operate under different laws. Will the exchange located in the Ukraine honor court orders of a U.S. court if the some of the heirs live in Hong Kong?
Another problem is that there are hundred of online cryptocurrency exchange services in many different countries. The larger and better-known services include Coinbase, Coinsquare, bitFlyer, Kraken, Gemini, Cex.io, Poloniex, Bitstamp, Bitfinex, and many more. That’s an abbreviated list; there are many more such services in the U.S. and overseas. The deceased may or may not have used a crypto-currency exchange service in his or her home country. It is completely legal and not unusual for a U.S. resident to use the services of a crypto-currency exchange in England, Singapore, or Belarus. Overseas cryptocurrency exchanges often offer better prices and may have stronger privacy laws than do the U.S., Canadian, or other exchanges.
The future heir(s) will need to know which service(s) the deceased person used.
So how does any person make sure that his or her heirs can obtain the assets to which they are legally entitled? Obviously, the person with the knowledge has to share that knowledge with a trusted family member, a friend, or perhaps an attorney. Perhaps the best way is to never verbally tell anyone else but to leave written instructions along with a message of “to be opened only in case of my death or total disability.”
One good place to keep the instructions for accessing your digital assets is to keep the instructions in the same place as your will. However, most legal experts will suggest you not put those instructions in the text of your last will and testament. The reason is that, in most jurisdictions, after your death, your will processed in probate court and the text of the will becomes a public document. Anyone then has a legal right to obtain a copy of the will from the court and read its contents. (There may be exceptions in some jurisdictions.) If you place instructions in how to access your funds in the text of a will, those instructions will become public once the will is probated. Besides, there is no legal requirement to place access instructions in the text of a will.
Perhaps the better solution is to document the information required to access your digital wealth, seal the instructions in an envelope, and store the envelope in a safe place alongside the last will and testament. Perhaps in your lawyer’s office is a good place. Since the instructions are not a part of the will itself, most courts will not consider the external document(s) to be public information.
As always, ask your attorney for advice concerning the rules and regulations in your area.
NOTE: Of course, the person needs to inform future heirs that (1.) there is a will and (2). to provide information about the lawyer’s name and office address.
Providing for passage of digital assets to legal heirs is actually a simple process but only if the owner of the assets takes steps NOW to provide a smooth transition. If such steps are not taken and if the heir(s) of those assets cannot access the digital currencies, those coins will become abandoned.
For more information about safely and securely storing your cryptocurrency and to make that information available to your heirs at the appropriate time, read: Cryptoasset Inheritance Planning: A Simple Guide for Owners by Pamela Morgan. It is available from Amazon as a FREE Kindle book (the Kindle hardware device is not included) or as a paperback, currently selling for $29.04. The same book may also be available in other bookstores. Look for ISBN 1947910116.