Since cryptocurrency is moving into the mainstream, it presents some potential challenges for estate planning.
You can’t touch cryptocurrency the way you can touch bills or coins, and it’s a still a modern mystery for many people. However, if you have a lot of it, you need to put a plan in place for your heirs. What happens to cryptocurrency in your estate plan? How do you pass it to your heirs?
Bankless Times recently reported in the article, “What happens when your estate is cryptocurrency?” that cryptocurrency like Bitcoin is stored in virtual wallets.
A wallet has a combination of random characters called a “public key” required for sending or receiving the currency. There’s another key, called the “private key,” which is like a password you’d use to access your account.
Imagine that a cryptocurrency owner dies without divulging their “private key.” This could mean the heirs will have a tough time gaining access to the funds. They would actually never get to it.
That is why it’s so important, as part of your estate planning, to put your “private key” details into your will. This is safer that making a note of it somewhere, which could easily be discarded and lost forever.
Another option is to put the “private key” on a flash drive, so it’s in physical form. However, there are also risks with this, like the “private key” being deleted. There are third-party exchanges that many Bitcoin investors use which act like banks. They keep the “private key” for the customer.
You should also tell your family that you have cryptocurrency in a wallet, because a third-party service won’t announce to your next of kin that you have cryptocurrency.
This is an emerging area, so you’ll want to make sure you plan it out to ensure that your cryptocurrency and all digital assets are handled correctly in your estate plan.
Reference: Bankless Times (March 6, 2018) “What happens when your estate is cryptocurrency?”