One of the biggest appeals of cryptocurrency, like Bitcoin, is that it is decentralized, unregulated, and anonymous. There are no financial institutions controlling it, and unless you tell someone you own digital currency, it remains a secret.
When it comes to estate planning, however, that kind of secrecy can be disastrous. In fact, without the appropriate planning protections in place, all of your crypto wealth will disappear the moment you die or become incapacitated, leaving your family with absolutely no way to recover it.
Indeed, we’re facing a potential crisis whereby millions—perhaps billions—of dollars’ worth of family wealth could potentially vanish into thin air unless you take action to protect your digital assets with estate planning. Fortunately, putting the appropriate safeguards in place is a fairly simple process for a Personal Family Lawyer® experienced with cryptocurrency.
The first step in securing your crypto assets is to let your heirs know you own it. This can be done by including your digital currency in your net-worth statement listing all of your assets and liabilities. Along with the amount of cryptocurrency you own, you should also include detailed instructions about where it’s located and how to find the instructions to access it. But you want those instructions to be kept in an absolutely secure location because anyone who has them can take your cryptocurrency.
Even if your heirs know you own cryptocurrency, they won’t be able to access it unless they know the encrypted passcodes needed to unlock your account. Indeed, there are numerous stories of crypto owners losing their own passcodes and then being so desperate to recover or remember them that they dug through trash cans and even hired hypnotists.
The best way to secure your passcodes is by storing them in a digital wallet. The safest option is a “cold” wallet, or one that is not connected to the internet and thus cannot be hacked. Cold wallets include USB drives as well as “paper” wallets, which are simply the passcodes printed on paper—and ideally stored in a fireproof safe.
But as with the existence of your crypto assets, the only way these wallets are of any use to your heirs is for them to know where they are and how to access them in the event of your incapacity or death. So make sure these instructions are included in your estate plan and your Personal Family Lawyer® knows about the assets and where to locate the instructions on how to access them.
Just as it would be foolish to store your money in a secret safe and not tell anybody where it is or give them the combination to open it, it’s just as foolhardy not to take the appropriate steps to protect your cryptocurrency through proper estate planning.
Since digital currency is such a recent phenomenon, not all estate planning attorneys are familiar with it, but with us as your Personal Family Lawyer®, you can rest assured we have the knowledge and experience to help you safeguard your digital wealth just as effectively as all of your other assets.