Pretty much everyone has heard of Bitcoin, but, for the few who haven’t, Bitcoin is a digital currency that, in order to get, you have to “mine.” You mine Bitcoin by running software that finds the key to open the digital Bitcoin lockbox, so to speak. When your software finds the key, you get twenty-five Bitcoins. This unusual process isn’t the only way to get the coins, however; you can also trade them for fiat (domestic) currency.
Bitcoin is super volatile, but it can be very profitable given the right circumstances. Its price can soar or drop, making it one of the more exciting assets out there. If you’re a Bitcoin investor, first of all, congratulations on being brave. Second, if you consider Bitcoin a part of your assets that you want to hang on to, you can protect them through estate planning.
Bitcoin in Your Estate Plan?
You’ve mined your gold and now want to protect it. Luckily, estate planning is a field that has kept up with this technological advancement, and you are able to protect your Bitcoin the way you would any other, more conventional, asset.
People tend to talk about Bitcoin’s price, not about what you do with it after you die. You store Bitcoin on a computer, whether in cold vault storage, a digital wallet, USB port, or some other digital means. This makes it different than, say, real property, which is held in the corporeal world.
Bitcoin does differ when it comes to trading, as you’re not asked to name a beneficiary when you buy or sell through an exchange, a practice that is common when trading other assets. The anonymity of Bitcoin (no identification required to buy or sell) is another problem, as there’s no information attached to this form of property. Your Bitcoin is just floating around in the computer world, and it needs to be tethered down somehow.
To make sure you’ve got your gold protected, you need to update your documents to include your digital currency, what you want done with it after you die (buy, sell, keep, etc.), and how to access it. If you don’t, this property will end up in probate court, where a judge will distribute it.
Things to Consider
One of the most important things to consider is making sure that your beneficiaries have the ability to access your bitcoin. Give them the private key, password, and whatever else they need to get to your bitcoin. List the different digital holdings you have and how to electronically get to them. If you have your currency locked up and die without giving people instructions on accessing it, it will be gone forever.
Secondly, make sure your beneficiary understands how to manage Bitcoin. Bitcoin, as stated above, is volatile, with tons of swings in price. It’s not for the faint of heart. You can lose or gain a lot of money, depending on what the market decides to do (true, that’s common with many assets, but it’s more pronounced with Bitcoin). Ensure that your beneficiary knows how to handle this currency, and leave them detailed instructions.
Bitcoin is an exciting new currency, and, like any other asset, it needs to be protected and maintained via documents in your estate plan. Consult an attorney today to find out how to best manage your Bitcoin.