Sr. Fintech Consultant, BTC, Blockchain, Cybersecurity, Artificial Intelligence
I’ve just been reading an interesting article by Jamie Hopkins at Forbes. In it he explores the tricky question of “What happens to my bitcoin when I die?” The likelihood is that the majority of retail bitcoin owners are of an age when they don’t think too much about the end of life, but then again, even if we are feeling in perfect health, it is best to be prepared.
Hopkins points out that digital assets are a booming business, and we’ve seen a strong revival in their fortunes this year. As he says, as of June 2019 over $335 billion is invested in cryptocurrencies.
What happens to all this wealth in the case of the owners’ demise, or inability to manage their investment portfolio? Hopkins says that while crypto has made doing business easier, it has made estate planning more difficult. In the case of digital assets, “traditional methods of writing a will and letting the executor find all the assets won’t work moving forward.”
There are some legal rules for digital asset owners to follow, at least in the USA. The Revised Uniform Fiduciary Access to Digital Asset Act (RUFADAA) establishes the rules and regulations surrounding digital account ownership. Americans should study these rules and update their wills and trusts accordingly, Hopkins advises. And crypto owners will need to ensure that whoever is handling their estate has access to their digital assets.
One of the issues is that the Internal Revenue Service (IRS) in the USA doesn’t accept that cryptocurrencies are currencies. They tax them as they would your physical belongings.
Under the RUFADAA rules, online management systems are atop the hierarchy over any other form of instruction about an account. Hopkins explains, “So, if you set up a beneficiary designation on your online account, it would take precedence over account instructions listed in your will, trust or power of attorney documents.”
Crypto owners need Terms of service agreements (TOSAs) because they dictate account control past the original owner. When you sign up for an account at a crypto exchange, you usually sign a TOSA: “This would control account access in the event of death or incapacity if no other actions were taken.”
But what anyone owning bitcoin really needs to do is plan in advance so that your heirs have access to your crypto accounts. However, there is a snag: “ account access doesn’t equate to account ownership.” And as Hopkins adds, “Perhaps even more frustrating is that the service provider or custodian of the online account or digital asset doesn’t need to grant the fiduciary account access.”
But Hopkins does have some useful suggestions about the actions you can take now to ensure your heirs can benefit from a crypto inheritance:
· Track personal keys
· Monitor online exchanges
· Consider moving funds to a hard wallet
· Update legal documents
· Track all digital assets, passwords and locations
· Track valuation of assets
As digital assets grow in popularity, more of us will have to think about them as an inheritable asset. I for one want my children to benefit, and therefore it is my responsibility to make sure that they do.