Hyden, Miron & Foster, PLLC Law Blog

Monday, May 21, 2018

What Happens to Your Cryptocurrencies When You Die?

Bitcoin and other cryptocurrencies are a virtual form of money that is only used for online transactions. Cryptocurrencies do not have intrinsic value because they are not redeemable for another commodity such as gold or silver. However, cryptocurrencies can have substantial value. This form of currency does not have any physical form and only exists online. Therefore, it can be a challenge to ensure that the asset is not lost when someone dies.

Unfortunately, many people who own cryptocurrencies do not take steps to ensure this asset is transferred to their heirs upon their deaths. If you own cryptocurrency when you die, and you have not taken any steps to protect this asset, the cryptocurrency could be lost forever. Our Arkansas estate planning attorney works with clients to develop strategies to protect cryptocurrency and ensure heirs have access to this valuable asset when a loved one passes away.

Accessing Cryptocurrency

Cryptocurrency is protected by unbreakable cryptography, which makes these assets a good way to invest money securely for many individuals. For example, Bitcoins are held in a virtual “wallet” that has a public key (a random set of characters that serves as the wallet’s “address”) that anyone can see. A private key allows the owner to access the contents of the virtual wallet.  Without the public key and the private key, a person cannot access the wallet. However, if the owner dies without providing the key to his heirs, the heirs may never gain access to the wealth within the account.

One of the best ways for you to ensure that the account or accounts that hold your cryptocurrency are not lost upon your death is to list the assets in your will specifically by name. If your family does not know about the cryptocurrency, it could overlook this valuable asset. An heir might find the flash drive that you used to keep your private key but fail to understand the value of what he holds in his hand. The flash drive could be thrown away or misplaced and lost forever.

By including language in your will about your cryptocurrency, you ensure that your heirs know about the asset, you control who inherits the cryptocurrency after your death, and you provide a way for your family to access the account. However, including specific sections for cryptocurrency in your will is only the first step in ensuring your heirs have access to the funds. Your heirs must know where to “look” and how to access the accounts with your private key.

Leaving Detailed Instructions

In many cases, a person may decide to leave a written letter explaining cryptocurrency to his or her heirs and how to access the accounts. However, this information must be secure to prevent fraud. If your private key falls into the wrong hands, you could lose everything in your accounts. Therefore, you must carefully consider how to secure the information but make it available to your heirs upon your death.

Our Arkansas estate planning attorney can work with you to determine the best way for you to protect your cryptocurrency but make sure that it is accessible upon your death. Some options you may want to consider for protecting your information include:

  • Using a cryptocurrency service to manage all your investments in Bitcoin and other virtual currency. With the correct documentation, your heirs can contact the service to gain access to the virtual currency if your private key and other information cannot be located after your death.

  • Make digital backups of the information, including the private keys, and store these backups in a safe in your home or a safe deposit box.

  • Consider using a trust as part of your estate planning to hold the cryptocurrency. Your trustee would have access to the accounts and information according to the terms of the trust.

There are several ways you can ensure that your cryptocurrency is not lost upon your death. Call today to set up an appointment with an Arkansas estate-planning attorney at Hyden, Miron & Foster, PLLC for more information and to discuss options based on your specific situation.

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