Estate Planning in the age of Bitcoin

When I meet with clients for their estate planning, I always ask about their assets-real estate, tangible items, vehicles, boats, retirement accounts, bank accounts, collectibles, etc; but now, I routinely ask do you own any Cryptocurrency?

Cryptocurrency is basically unregulated “digital cash” that is a bearer account that exists only in the digital world and stored on a digital ledger, and not regulated nor or any records kept by any government or financial institution. Over 10% of people in the U.S. now own some form of Cryptocurrency.  The most common is Bitcoin but many others exist such as Dogecoin, Ethereum, Ripple, and Dash.  The price of each one can vary wildly.  Bitcoin traded as high as $64,000 in April of 2021 only to drop tens of thousands in months after.  Since Bitcoin has existed for just over a decade, there is no real track record.  Many established companies now accept Bitcoin as form of payment along with many banks, Paypal, and some professional sports teams for their players’ compensation.  El Salvador is the first country to formally accept and to require all businesses, except those without the technology, to accept payment in Bitcoin.

Over 20% of all Bitcoin (and other digital cash) are lost. If you put regular cash in a safe-it can be accessed by some means. But Bitcoin and others can only be accessed by a unique “private key”-similar to a password.  If lost, the Cryptocurrency can never be accessed or found. There are stories of many people losing access to their Cryptocurrency, such as Stefan Thomas, a programmer who lost $220 million of Bitcoin, and Matthew Mellon-heir to Mellon Bank who died leaving his executor no access to over $500 million of Bitcoin.

What to do if own Cryptocurrency?  Casa is a company that requires signatures of 3 of 6 trusted individuals to access the private key at death.  A “dead man” switch that releases the key to pre-determined heirs on death, or inactivity of account for say, 6 months is another option being explored.  These can be quite expensive, sometimes running hundreds or thousands a month.  You can also tell your lawyer, trusted friends, or family, or seal the private key in a letter to be opened at death; or even in a safety deposit box.

For Cryptocurrency it is important to consider and document in your estate planning who would inherit, if owned.  Of course, you don’t want to put the “private key” in the Will since would eventually become public record. I recommend clients to keep the private key safe but accessible by those you trust upon death or disability.