Unless you make other plans a Court will dictate who owns your Crypto.
Read our article to discover why this happens and learn the ONE QUICK THING that every Crypto Investor can do in a couple of hours to protect their Families and their Cryptos from loss.
3,000 words. 15 Minute Read.
It’s perfectly understandable why people don’t plan for the Unexpected!
Thinking about your own death isn’t much fun. Which might be why only 43% of Americans have a Will That figure is even lower among 18 to 34 year old Americans where only 18% have a Will. [CNBC]. Worldwide this same 18-34 year old age group own 58% of all Bitcoins in circulation. So it’s reasonable to assume that a lot of Cryptocurrency is at risk of being lost forever due to a lack of Planning.
People dying ‘Intestate‘, (without a Will), is not unusual. When this happens the ‘Intestacy Laws’ where you live will dictate who your Heirs are and what each Heir will receive. This assumes your assets are both findable and accessible, which poses unique problems for Crypto Owners.
Don’t worry, you don’t need to reach for a pen and immediately write a Will. In fact, depending on your local Intestacy Laws you may be content without a Will, at least for the time being. Eventually though, a Will is a really good idea, but you don’t need me to tell you that.
Probate, Executors & Your Estate
When you die your assets go through a legal process called ‘Probate’. A court supervises the Probate process and their approval is required before your assets can be distributed.
Probate laws differ from one legal jurisdiction to another, but generally during Probate an ‘Executor‘ will audit your Assets and Debts. The Executor often has a legal liability to execute their duties properly and audit and distribute your assets legally and correctly. Keep this in mind as it becomes important later on.
The Assets that remain after your debts are paid are called your ‘Estate‘. Your Estate is then split between your Heirs. Your Heirs, of course, are the legal recipients of your Estate.
People who have written a Will choose their own Executor and Heirs, they decide exactly which Assets each Heir will receive. If you die Intestate (without a Will) then your local Intestacy Laws dictate who your Heirs are and exactly what each is to receive.
Should you leave a Will which does not include all the assets in your Estate then Intestacy Laws may also dictate the distribution of the ‘non-included’ assets.
Any instructions you leave outside of a Will are not enforceable in law. Your Heir’s ‘might’ choose to respect your wishes, but they are under no legal obligation to do so.
Note: Probate can be avoided by using more advanced Estate Planning options. These are worth discussing with a Lawyer if your assets are sizeable.
Problems with Intestacy law
The Intestacy Laws where you live will almost certainly say that your assets are to go to your Spouse and Children. If you do not have a Spouse and Children then Siblings and Parents may be second in line. Eventually, if not relatives can be traced your assets would go to the State, but this is happens rarely.
Intestacy laws in many places have yet to catch up with modern lifestyles. So unmarried partners, same-sex partners, step children or step-siblings may get nothing.
Here is a theoretical scenario under UK Intestacy law : You and your Spouse divorced several years ago and have two Children from that Marriage. You now live with your Unmarried Partner and together you have a newborn child. In this scenario only the three Children from your two relationships inherit your assets. Both your ex wife and your new Partner are ineligible to receive anything.
If your Divorce was not finalised when you died then things get more complicated. Your almost-ex-wife could inherit all your personal property (the ‘Physical’ items you own). Your Ex would also receive the first 250K of the remaining assets and 50% of any assets over 250K. Your three Children would then split whatever is eft. Your new Partner still gets nothing.
Depending on your circumstances Intestacy laws can be very harsh on those left behind.
You need to understand your local Intestacy laws, there is a checklist at the end of this article to help you do just that.
You may decide to let your Heirs simply help themselves to your Cryptos if and when your time comes. It seems such a simple solution after all. Of course you need to document some sensitive ‘access’ details for your Heirs to use and keep those sensitive details safe from prying eyes. But, all things considered, this may seem the simplest and least difficult option for you and your Family.
Firstly and most importantly, it’s up to you what you do with your money. We’re not here to tell you what do do. The ‘Unofficial’ Inheritance process we’ve just described may work for you.
Or it might go very wrong and create life-long family disputes, or even bring lawsuits and criminal charges against the people that received your Cryptos.
As a rule of thumb if the person that receives your Cryptos has to keep that fact a secret then there is the possibility of these unintended consequences arising. Not to mention that keeping secrets can often mean needing to lie in order to conceal those secrets. This is an important consideration that we go into in more depth a little later on.
Before we continue please take a moment to ask yourself…
Why you want leave your Cryptos to your loved-ones ‘Unofficially’, what advantages does this offer you and your Family?
Once you’ve established why you may want to do things this way then let’s proceed.
In general these consequences can arise in one of two set of circumstances:
- A)You have secretly left Cryptos to a group of people outside of any Probate Process
- E.g. Your adult children
- B) You have secretly left Cryptos to an individual outside of the Probate process
- So this person is not included in your Will or is not a legal Heir according to the Intestacy Laws where you live.
- E.g. Your Unmarried Partner.
In both cases the people that received your Cryptos need to keep this fact a secret. Either from the other Heirs in your Estate or from the local Tax Authorities.
The consequences fall into two broad groups:
- Family Disputes
- Legal issues
A) Scenario 1 – You secretly left Cryptos to a group of people.
Let’s say you are an older investor and you leave a large sum of Crypto to your married children. You do this to avoid their needing to pay any Inheritance Taxes on that money (Scenario B from our list earlier in this article).
Well now you’ve just made everyone involved the keeper of the others secrets. It only takes one family dispute, one difficult to explain expensive purchase or one very nasty divorce, even years after you die, for this serious tax-evasion secret to come out in the open. Why risk it?
If you have significant Crypto assets then you need to speak to a Lawyer about your Estate Planning options. If you’ve held these Cryptos outside of the financial system and have not paid taxes on them then you need to decide if this is more important to you than ensuring your Family are provided for after your death.
A good Lawyer may be able to help you regularise your position, but please research their obligations to report suspected Money Laundering first as if you live in the UK your Lawyer may be legally obliged to breach Client privilege.
Let’s say you live with your unmarried Partner and you have left them instructions to access your Cryptos should something happen to you. It’s your decision that they should keep your Cryptos and your Family can have your other assets as per your local Intestacy Laws. Obviously you do not have a Will as you are young and you really do not think your passing away is really going to happen anytime soon.
Sadly something does happen and your time comes way too soon. Once your Partner gets over the initial shock they follow your instructions and take possession of your Crypto assets. Your Plan has worked perfectly right? Well it might have, but only if your Crypto assets remain unknown during the Probate process. If your Family come to find out you owned Cryptos which now cannot be found then a number of serious problems can develop.
How will your Family know you owned Crypto?
Several things can show that you owned Cryptos.
1 – Your Crypto investing was not a secret.
If you’ve previously discussed your Crypto Investing with your Family then your Cryptos will be noticeable by their absence.
2 – How will your Family find your Crypto Wallets?
Have you ever sent money to a Crypto Exchange from a Bank Account, or used a Credit Card to buy Cryptos? If so then you can count on the Executor of your Estate finding those transactions listed in your Bank or Card Statements.
3- Your Executor will then contact those Exchange(s).
The Executor will contact your Crypto Exchanges and :
- Query your account balance(s)
- Obtain a copy of your Transaction history.
The Executor will now have a list of your transaction details and might even get a list of wallet addresses you used to transfer funds to and from the exchange.
Oh, if your Executor does not have the technical knowledge to understand the information they have found then you can count on them finding help to do so if the sums of money being investigated warrant it.
So what, those Cryptos cannot be traced to my Partner?
Let’s apply the famous ‘So What’ test to the scenario above. At this point the Executor of your Estate has identified your Crypto Exchanges you use and they have a list of your transaction information identifying a number of Wallet addresses you have transacted with. Also keep in mind that in many cases the Executor will be close Family member of yours.
So what consequences can arise for your Partner?
The Executor will ask the people closest to you if they know anything about your Crypto Assets. In this scenario two things are now going to happen:
- Your local Intestacy laws have made your immediate Family members your legal Heirs.
- It is unlikely that your unmarried Partner is included in that list
- So your Cryptos do not Legally belong to your Partner.
- Therefore by taking those Cryptos they are committing a criminal act.
- In order to keep your Cryptos your grieving Partner now needs to lie to the grieving Family member who is acting as your Executor.
Are you okay with putting the people you love into this very likely-to-happen situation? If your Family know you owned Crypto, even if they did not know the exact details, then they are going to ask your Partner about it, you can count on it.
If your Partner tells the Executor the truth then it will create Family problems (“How dare they take those assets that don’t belong to them.”). If your Partner lies to the Executor then suspicions and accusations can arise from the legal Heirs of your Cryptos towards your Partner.
If the transaction information from the Exchange establishes a list of Wallet Addresses that are ‘Probably’ your personal Wallet Addresses, and transactions have taken place after your died, then suspicions will form. Even if nothing can be proven those suspicions can create or amplify the Family disputes over the ownership of your Cryptos.
Let’s take this scenario one step further and discuss what can happen if your Partner has also accessed your Exchange account(s).
Letting someone access your Exchange Account(s) after you die
What if someone accessed your Exchange accounts after the date of your death?
If someone, with your prior permission, has accessed your Exchange Accounts after you died then the potential consequences get more serious.
Both the Executor and the Exchange company will realise that your account was accessed after the date of your death.
- The Exchange(s) could lock down any remaining funds in your account(s). Thus creating issues for your Executor in accessing any remaining assets or getting permission from the Probate Court to close your Probate and distribute your assets to your Heirs.
- The Exchange(s) or your Executor might need to involve the police to avoid any legal liability for the missing Cryptos.
- The Exchange will have the IP address that logged into the account after you died and they will also know (and thus be able to trace) which Wallet Addresses your Crypto Assets were withdrawn to.
You might think that police involvement is unlikely.
- However both the Executor and the Exchange(s) may need to avoid legal liability for the loss of your Cryptos. Filing a Police report will help them do so.
- It is also possible, depending where you live and the sums of money involved, that the act of taking those assets from your Exchange account could be considered a crime (Fraud, Theft or Larceny).
What if the Police get involved?
Let’s use the ‘So What’ test again and assume that a Police Report is filed regarding your missing Cryptos. Yes it’s quite possible the Police will not be able to trace your missing Cryptos and cannot prove that your Partner took them.
It’s also quite possible that the Police will not even investigate the matter and that the Report will simply be used by the Executor of your Estate in order to close the Probate Process and avoid any legal liability for the missing Cryptos.
But Imagine how your Partner will feel when the Police get involved?
Your Partner is now in the position where they’ve illegally taken your Cryptos from a Crypto Wallet or Exchange and possibly lied to members of your Family about it.
Even if the Police involvement is limited only to filing a Police report, and they never investigate, your Partner won’t know this that the moment they discover the Police have become involved? Your Partner will understandably worry about a possible Police Interview. How much worry and stress would a possible Police Interview cause your Partner and how might they react? You be the judge of that.
If a Police Interview DOES happen then your Partner is now in the position where they have to either lie to the Police or come clean and tell the truth.
- If your Partner tells the truth to the Police then your Family will realise that your Partner lied to them, thus severing any friendship that might exist. Your Partner may also face charges for them taking your Crypto assets after your death.
- If your Partner lies to the Police and is later discovered to own those Cryptos then serious criminal charges may also follow.
Yes of course it’s possible that the Police and your Family can never prove your Partner took the Cryptos. But can you be 100% certain that your Partner will access and dispose of those Cryptos in such a way as to avoid any detection. Will they use a VPN to access your Wallets, will they sell those Cryptos at Exchanges or Sites which do not have any ID information on file about your Partner?
Your Partner will be grieving and under stress, can you be sure their ownership of your Cryptos can avoid detection and is it fair to put them into this position in the first place?
Here are a few quick things you can do to greatly increase your understanding of your own situation.
1) Research the Local Intestacy Laws where you live.
Decide if these laws give your assets to the people you want to have them. If so then you have some time before you might need to definately make a Will although you will need a Will eventually. Your life will change and at some point there will be someone or some organisation you would like to leave money to that will not be covered by the applicable Intestacy laws. When that happens a Will is needed.
2) Consider your reasons for doing things ‘Unofficially’?
If you were or are considering letting someone access your Cryptos after your death outside of any legal process then ask yourself now if the advantages of doing that are really worth it?
Perhaps you thought this was the ‘easy option’.
- Now that you’ve read some of the possible consequences involved you might have changed your mind.
- You could consider writing a Will to choose your own Heirs
- Or you could put certain assets into joint ownership.
- Depending where you live this might ensure your Partner would legally keep those assets were you to die Intestate (without a Will).
Or perhaps you are trying to avoid Inheritance Taxes.
- If so then you might definately be leaving some serious legal issues for your loved-ones.
- If your assets are significant you have multiple options available to help you minimise the tax liabilities involved. Speak to a Lawyer or two and assess your options.
- There is little real need to ask your Heirs to break the law
The one thing that EVERY Crypto investor must do is.....
You have to build a Crypto Inheritance Plan, so your Crypto Assets can be found and accessed.
Please make sure your Cryptos can be found before you do anything else. It will not matter if your Cryptos are perfectly protected by Intestacy Laws or by your Will if nobody can access your Wallets.
This work need only take a couple of hours of your time. If you do not know where to begin then we have great news for you….
We are currently working on a free online course that anyone can use to protect their Crypto Assets.
Our Free Course will teach you how to :
- Safely and Securely document the information your loved-ones need.
- We will teach you how to select the people you need to help access and distribute your Cryptos
- And we will show you how to keep this information confidential and for your-eyes-only until the day your loved-ones actually need to see it.
Thank you for your time , we hope this article was useful and please feel free to send us any questions you may have via the form on our Contact Page.
Live long and prosper 🙂
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This article is not legal advice and should not be considered as such. Probate, Intestacy and Estate Planning laws will differ based on the legal jurisdiction in which you live. This article makes general observations and is not meant to be used in place of specific legal advice from a Lawyer licensed to practice in your area. Depending on your specific circumstances and the legal jurisdiction in which you live there will be caveats, exceptions and other considerations related to the points we discuss here. Please speak to a Lawyer if you have specific legal questions to address relating to anything discussed in this Article.