Posted by BRIAN PRZYSTUP & ASSOCIATES LLC

Bitcoin: What happens to it when you die?

Bitcoin: What happens to it when you die?

What is bitcoin?

An unknown person with an alias of Satoshi Nakamoto created the new currency bitcoin in 2009. There are no banks involved with bitcoin transactions - no middle men. It can be used to book hotels, furniture shopping on Overstock and purchasing Xbox games. However, a lot of people have gotten rich from it by trading and as they years pass by, the price of bitcoin skyrocketed into thousands.

If you want to buy merchandise anonymously, you can use bitcoins to do so. Since bitcoins are not tied to any country or subject to regulation, international payments are made easy and cheap as a result. Bitcoin is attracts small businesses more because there are no credit card fees while some people purchase bitcoins as an investment. Everyone then hopes for its value to keep on rising.

Can bitcoin last forever?

Your bitcoin might vanish forever if you don’t prepare. A perfect example is the young man who died suddenly in Colorado this year. The family had a hard time sorting out his state until the family discovered their loved one had been investing in Bitcoin. The value of the digital currency recently climbed as high as $5,000 from as little as $13 in 2013. The grieving family only need to find and access the cryptocurrency in order to inherit a small fortune - the problem is they couldn't.

The unbreakable cryptography is the protector of bitcoins, a virtual form of money. Although this characteristic makes it a secure way to store wealth, the risk that comes with it when the bitcoin owners die is also apparent. This will mean their digital fortune will forever be out of reach. For the relatives of tech-savvy individuals who have invested in a market currently worth about $70 billion, that’s a huge problem to face.

It’s safe to say cryptocurrency might outlast you even though no one really knows how long they will last. The process of passing your digital holdings on to your family after your dead is not similar to bequeathing cash or other property. Understand that wills aren’t made for confidential information.

To transfer funds from a wallet, a private key is all that’s necessary but that means including that information in your will is a terrible idea. Estate planning attorney Gordon Fischer advises people not to put any information they consider private into their will because after your death, wills turns into court documents and are generally public documents. This means it’s going to be accessible by anyone.

When you create a new cryptocurrency wallet, a private key is generated and it’s an unchangeable password. It’s important that you always keep it safe and secure no matter what.

The risk of exposing the keys to your crypto wallets itself is unwise although a will still might not enter public records immediately. Your private key may not be recognized by your family right away and even if they do, crafty crooks or other unsavory characters have already pilfered your digital wealth. However, Fischer reminds everyone that trusts are “generally private documents.”

There’s an established procedure for claiming conventional assets and that’s through probate court but the process is less certain when it comes to cryptocurrencies. Many cryptocurrency exchanges don’t allow their customers name their beneficiaries which makes it a complicated matter. The burden is placed by coinbase, the largest trading platform, on the heirs to claim any assets left by the person who passed. 

The cryptocurrency world isn’t the only one having problems. Robinhood, a popular trading app which recently started offering crypto trading doesn't offer basic support to its beneficiaries. Crypto inheritance could quickly turned into a protracted legal nightmare as a result of heirs proving what they are entitled to.

Delivering crypto from the crypt has no perfect solution. Dividing portions of your private key among trusted advisors and loved ones have become a constant suggestion on the bitcoin subreddit. They key can be pieced together after you passed to access the associated wallet.

The amount of bitcoins being lost by people because of sudden death without a plan in place for their cryptocurrency is still a mystery. Around 2.3 million and 3.7 million bitcoins are estimated to have been lost for various reasons. If we look at the amount using the current prices, that’s worth between $15 billion to $24 billion.

BRIAN PRZYSTUP & ASSOCIATES LLC
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