Virtual Currency Can Create Very Real Problems for Heirs
Feb. 28, 2018
In a previous post on this blog, we discussed the importance of making a will accessible so that the process of administering an estate can be easier and faster. In that post, which can be read in full here, we note that lack of accessibility is one of the major obstacles to administering an estate in accordance with a person’s wishes.
However, accessibility challenges don’t end with a will. Probate can also become very complicated and lengthy if you do not grant access to your assets. One specific type of asset to think about these days in terms of accessibility is cryptocurrency.
What Is Cryptocurrency?
Cryptocurrency is digital currency. There are numerous different cryptocurrencies, including Litecoin, Bitcoin and Ethereum. Broadly speaking, this is digital currency that is not regulated by any government or third party. There is no physical form of this money; it is created, kept and used digitally.
Why Is It Such a Problem in Probate?
The basic concept behind cryptocurrency is that it is encrypted and decentralized. While this makes it secure to use and keep, it makes it all but impossible for family members and others to access it if the holder of the cryptocurrency passes away, as was the case for the father in this Bloomberg article.
Considering how dramatically the popularity and value of cryptocurrency has changed in recent years and months, it is very possible that you or someone you know holds some. If that person dies without telling anyone about the existence of the cryptocurrency or about how to access it, that money is essentially gone forever.
Further, it can create frustration, anger and confusion during the probate process if beneficiaries know there is cryptocurrency but no one can figure out how to access it and who should receive it.
How to Protect Cryptocurrency and Other Digital Assets
Protecting these assets requires careful planning and clear direction. Unlike real estate, family heirlooms and other property, people cannot see digital assets or readily access them. As such, it is crucial for people who own cryptocurrency to discuss with their attorney how to protect it and how to ensure the courts distribute it properly in the event of death.