Bitcoin and digital assets affect estate planning

The potential of bitcoins to store value has caught the attention of some investors in Nevada. As a digital asset with a private password, it requires special attention when someone wants to pass the asset to another party. Estate plans also need to formally address other forms of digital assets, like social media and PayPal accounts, to ensure their timely distribution or simply to let heirs know that they exist.

The challenge presented by bitcoins arises from the fact that the cryptocurrency system does not have a method for retrieving a lost private password. If the person who possesses the password for the digital bwallet dies without sharing the key, then the asset is lost forever.

Methods for sharing the password within an estate plan offer various levels of security. An owner could inform heirs about the digital asset and tell them where to get the password upon the person’s death. For those who do not want to trust others with the information, an owner could schedule a time locked transaction that sends the asset to a recipient at a specific date in the future. Another approach employs a vault provided by Coinbase, which places the key in a safety deposit box. The Coinbase account can be jointly held.

Legal advice might help a person evaluate the options for transferring these types of digital assets. An attorney could research the laws that apply to the client’s specific situation and recommend options, like a trust, for holding and transferring assets. Once the decision has been made, the attorney could prepare the relevant documents.

Archives

FindLaw Network