There has been a lot of recent news about the founder of a cryptocurrency exchange suddenly dying and not having a plan in place to address his $190 million in bitcoin and other funds. The thirty year old founder and CEO of a Canadian cryptocurrency exchange died on a trip to India and did not share the password for his encrypted laptop with anyone. No one has been able to locate how to access the laptop computer which has left the company and investors in a state of chaos and uncertainty.
So what are bitcoins anyway? Bitcoins are a type of digital currency which are accessed through the use of a “private key” or password. Bitcoin users store the private keys in wallets which are generally stored online. Bitcoins can be purchased, sold or transferred once someone has access to the wallet.
While this is an extreme example of a major bitcoin player not having a plan in place, it highlights some takeaways for you if you own any digital assets like bitcoin. One of the reasons that bitcoin is attractive to some individuals is its anonymity. There is no paper trail and no physical assets to touch. However, this becomes a major problem if you die. How does your family access the bitcoins? Do they even know about it?
As with any estate planning in place, transparency and informing your fiduciaries and loved ones that you own bitcoin and how they can access them is key. It is critical that your bitcoins can be accessed in the event of your incapacity or death.
We recommend that our clients prepare a detailed letter and keep that in a secure location with your other estate planning documents. The letter should include your private keys and bitcoin transactions and needs to be updated periodically. The letter should also include any passwords or codes needed to manage the bitcoins.
Another complicating factor is that most exchanges that exist do not ask account holders to name a beneficiary which is common with other asset management accounts. This means that even if you inform your loved ones that your account exists, it must be named in your will or included in your revocable living trust for it to avoid going through the probate court which can be an expensive and time-consuming process.
Whether or not bitcoins are the currency of the future, it is imperative that you take the necessary steps today to ensure that your family can access your bitcoins after your death. Contact the attorneys at Sinclair Prosser Gasior to discuss your estate planning needs and the best way to plan for all your assets, including your cryptocurrency.