The rise of cryptocurrencies like Bitcoin and Ethereum pose an interesting challenge to those investors and estate planners wondering what happens to their “virtual” portfolio in the event of death.
Because Bitcoin is heavily protected from hackers, there is also the risk that it will also be inaccessible for family members after one passes away. It is stored in a virtual wallet that is protected by two kinds of keys; a “public key” that allows others to send and receive Bitcoin and a “private key”, which gives the owner access to their wallet.
After the owner of the virtual wallet passes away, the only way to access the Bitcoin is with the “private key”, therefore the best way to ensure your Bitcoin does not get lost in cyberspace is to make sure a trusted person such as your Financial Planner or Attorney has access to this key. There is the option to create a multiple-signature wallet, which means that it needs at least two authentication keys to access it. One key can be given to the beneficiary set to inherit your virtual wallet and the other to a trustee, meaning that they would both be involved in accessing and distributing the Bitcoin when you pass on, in terms of “my Will”.
You should state who is responsible for this key in your Will as well as who will stand to inherit your Bitcoin in the event of your death. This will help ensure that there is no uncertainty or risk of losing this investment. It would be all too easy for someone to say, “he would have wanted me to have it” and walk away with hundreds of Rands worth of Bitcoin.
However, at this stage Bitcoin cannot be declared part of the physical assets for your Estate. Nor can they be owned and managed by a Trust due to its virtual nature and the fact that it is not recognized as an official currency.
This, like all aspects of Financial Planning, is better dealt with sooner rather than later. It is important to plan for your future and put plans into place to ensure that your assets are passed on according to your wishes.
If you have further questions about incorporating Bitcoin into your Will, please do get in touch with me for assistance.
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