The matter of money is never easy, especially when it’s being discussed in relation to death. However, it is a necessary discussion, and with the meteoric rise of cryptocurrencies it is also a discussion in need of a new outlook.
Since their advent in 2009, cyber currencies like Bitcoin and Litecoin have become more and more popular. There are dozens of different kinds, but the most famous and profitable is undoubtedly Bitcoin which, after a slight slump has reached an all-time high in 2019,
The case of a Colorado man who died and left Bitcoins, as well as a heap of stress and trouble, behind for his family is a perfect example of why you need to think about cryptocurrencies when making your will and funeral plans.
The trouble with cryptocurrencies (legally speaking)
If you’re investing in Bitcoin on any serious level, then you’re surely prepared and switched-on enough to have prepared some measures for your eventual passing. What you might not know is that the instructions in your will won’t necessarily guarantee that your wishes are carried out after you die.
This is because, depending on where you live, your cryptocurrencies might not be considered money, but goods. This means they will be susceptible to the same taxes… and this is just the beginning. The legal status of cryptocurrencies like Bitcoin is not solid, but there have been changes to the law, recently, which are set to make it less so.
So, cryptocurrencies have made the business of dying a little more complicated for people who have invested in them. Complicated, but not impossibly so.
What happens to your cryptocurrency when you have no will?
The thing is, this is somewhat of a red-herring question; the truth is that your will won’t always be the final authority on what happens to any Bitcoin you have in online wallets.
However, if you don’t have a will, and you leave no other instructions, for example in an online management system, any of your cryptocurrency assets will fall into what some call “probate by truck”. That essentially means that any of your blood relatives, or your spouse, will be able to claim it under the guise of “he/she would have wanted me to have this”. This is because they are classed as goods rather than cash savings.
This may sound fine to you after all law dictates that your nearest and dearest get precedent so if you have no spouse or children this will mean that any assets go to your parents or siblings first and foremost. Of course, if you’re not careful the terms and conditions of your currency wallet may sink your ship, so to speak.
How to ensure your assets are properly disbursed
So, what does that mean for you?
Well, RUFADAA (2014), or the Revised Uniform Fiduciary Access to Digital Assets Act, has started to make the road to disbursement a little easier for families and fiduciaries. Of course, it relies on your setting up your estate cleverly while you are alive.
Firstly, you need to itemise your digital assets; you must know what you have so that you can complete a thorough analysis. Secondly, you need to look at the terms of service for your currency wallets; look for the key phrase ‘lifetime lease’. You will see this phrase in the TOS for services like iTunes; it means that you own the songs you buy from them for your life, but that you cannot pass them on. If you see this phrase in your currency wallet, you should consider withdrawing, moving, or otherwise converting the funds you have in order to ensure your heirs can inherit them.
Once you have your Bitcoin (or any cryptocurrency) in a place that will be accessible to your family, you have to consider how you’re going to make them aware of it. Check to see if the wallet has an online management system that will allow you to name a next of kin, if not you should name the recipient in your will. Don’t however, put your private key in your will as this is a legal document that becomes public domain.
So, what happens to Bitcoin when somebody dies?
The short answer? It depends very much on the will of the person in question. If you think ahead, there’s no reason why your Bitcoin should be lost to your relatives.