Actually, if you make no other plans then a Court will dictate who owns your Crypto.
Why does this happen and what options are available to make sure that the people you want to receive your Cryptos actually get them.
It’s perfectly understandable why Crypto Owners 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 Among 18 to 34 year old Americans only 18% have a Will. [CNBC] yet this same group (Worldwide) own 58% of all Bitcoins in circulation.
It’s reasonable to assume that a lot of Cryptocurrency is at risk of being lost forever due to a lack of Inheritance Planning.
People dying ‘Intestate‘, (without a Will), is not unusual. When this does happen the ‘Intestacy Laws’ where you live will govern how to manage your remaining assets.’ This assumes your assets are both findable and accessible.
Obviously this poses unique problems when it comes to Cryptocurrency.
Don’t worry! We’re not going to nag you to make a Will. In fact, depending on what your local Intestacy Laws say, you may be content without one, for now.
Alternatively, you may have decided to let your Heirs help themselves to your Cryptos if your time comes. It seems simple for them to just help themselves to your Cryptos at that point.
Of course you need to document some sensitive ‘access’ details for your Heirs to use and keep those sensitive details safe from prying eyes.
This approach might work well for you. Or it might go very wrong and create life-long family disputes, or even bring criminal charges.
Such unintended consequences linked to an Inheritance are not unique to Inheritances with Crypto related assets. Though Crypto does add some more potential problems.
Following we discuss how to leave your assets to your heirs in as ‘problem free’ a way as possible. Whilst minimising the bureaucracy for you.
But first, here is some of the necessary terminology.
Wills, Probate and Estate.
When you die your assets go through a legal process called ‘Probate’.
During Probate an ‘Executor‘ will audit your Assets and Debts. They law calls the net amount left your ‘Estate‘.
Your Estate is then split between your Heirs .These are the people who inherit your assets.
People with a Will decide who their Heirs are, and exactly what Assets each Heir will receive.
If you die Intestate (without a Will) then your local Intestacy Laws will decide on your Heirs and the amounts each receive.
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.
Drawbacks to Intestacy laws.
The Intestacy Laws where you live will likely determine that your assets go to your Spouse and Children. If you do not have a Spouse and Children then Siblings and Parents may be second in line.
Intestacy laws in many places have yet to catch up with modern lifestyles. So unmarried partners, step children or step-siblings may get nothing.
E.G. here is a scenario set under UK law.
You divorced several years ago and have two Children from that Marriage. You now live with your Unmarried Partner and have a newborn child together.
In this scenario only the three Children 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 not-yet-ex-wife would inherit all your personal property. She would also receive the first 250K of the remaining assets and half of anything over that figure. Your Children would then split the rest. Your new Partner still gets nothing.
Depending on your circumstances Intestacy laws can be harsh on those left behind. Please do some research on what the Intestacy Laws are where you live.
Earlier we mentioned possible unintended consequences. These can occur if your Family believe you owned a sum of Crypto Currency which is unaccounted for.
There are two main threats :
- Family Disputes
- Legal issues
How will your Family know you owned Crypto?
Several things can suggest 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 my Family find my 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.
Your Executor will then contact those Exchange(s). They will query your account balance(s) and obtain a copy of your Transaction history. To do so they will provide the Exchange with a copy of your Death Certificate and other legal paperwork.
It is now straightforward to establish the Crypto Wallets you withdrew Cryptos to. Your Executor might not have the skill sets to do this, so they will look for help, which is not hard to find.
Nobody can say for sure which of address are your Crypto Storage addresses, but they can make some educated guesses.
The What If’s
Here are some possible hypothetical scenarios…
What if withdrawals take place from these Wallet addresses after the date of your death.
Even though your Executor and Heirs can’t prove these are your assets changing hands, they might suspect it. The Executor will ask the people closest to you for their input, possibly forcing one or more persons to need to lie to the Executor of your Estate. Remember that this Executor will be a member of your Family or perhaps a Lawyer acting on their behalf.
You be the judge if that is something you and they are comfortable with..
What if someone accessed your Exchange accounts after the date of your death?
Both the Executor and the Exchange company will realise this has happened.
- The Exchange(s) could lock down any remaining funds in your account(s). Thus creating issues for your Heirs.
- The Exchange(s) or your Executor might involve the police.
You might think that police involvement is unlikely. However both the Executor and the Exchange(s) may seek to avoid liability for the loss of your Cryptos. Filing a Police report will help them do so.
“So What. None of this can prove exactly who did take my Crypto Assets”
“It’s impossible to prove who I gave my Cryptos to” is one respose I often hear. This is true, but it does not have to be proven for serious issues to develop.
The Unmarried Spouse Scenario.
You’ve researched the applicable Intestacy laws where you live. So you know that your live-in Partner gets nothing if you die Intestate.
You consider that you’re young, with no kids and so you’ve got plenty of time to write a Will later on.
Instead of making a Will, you take an easier option right now, safe in the knowledge you will make a Will in a few years time.
- Document the access information for your Wallets
- Store that information somewhere safe, known to only you and your Partner
- Make sure your Partner understands how to use this information.
Sadly the unexpected happens. After the shock subsides and a little time passes your Partner accesses your Crypto Wallets and takes your Assets as planned. Of course your other assets will become part of the Probate process and be left for your legal Heirs. Though at least your Partner has your Cryptos.
Your plan has worked perfectly…right?,
What happens now.
As you died Intestate (without a Will) a court appoints a Parent or Sibling as the Executor of your Estate. The Executor then values your Estate by assessing all your assets and debts, which are paid from the assets. Then the Executor gets the Court’s permission to distribute your remaining assets to your Heirs.
During Probate the Executor
- Find your Crypto Exchange accounts. So your family now know, if they didn’t before, that you own or have owned Cryptocurrencies.
- Whatever Crypto assets you might have owned when you died will soon legally belong to your Heirs. Regardless of who may possess them at this time.
At this point your Executor and Family don’t know how much Crypto you owned. Even if they think it was a modest amount, they may realise it could be worth a lot more in a few years.
Or they might wonder if you owned a lot of Cryptocurrency. People can get very imaginative about unknown sums of money in an Inheritance.
At this point, the very least you can expect is for your Executor to question your Partner about your Cryptos.
So, if your partner wants to keep those Cryptos then your grieving, heartbroken partner now has to lie to your grieving, heartbroken family. “So What” you say, “The Executor can’t prove anything”, and you might be right.
What your Family definitely CAN do is form suspicions and leap to assumptions. When an unknown sum of money is hard to find during Probate you can count on those involved to form suspicions and make assumptions. These suspicions can easily lead to accusations, arguments and family in-fighting.
Is this a fair thing to risk doing to the people you love, who will be in enough pain as it is?
If you think this scenario is unlikely then do some research online about Family disputes over Inheritances. You will find hundreds of cases to read about.
What if your assets were taken from an Exchange account?
If your Partner accessed your Exchange Account(s) after you died then there are more things to consider.
- The Exchange will have logged the IP address used to access the Account.
- Your Executor (or the Exchange) may now need to file a Police Report to avoid possible liability for the loss of your Assets.
- Your Executor may be prevented from closing the Probate process (and distributing your assets) without a Police report being filed.
Perhaps you’ve again thought ‘So What’ …
Well, if your Partner took your Cryptos, they are upset and grieving AND may have lied to your Family about your Cryptos already then…
- How might your Partner react when they find out the Police are involved?
- Will this cause them even more worry and stress?
- Even if a Police interview does not eventually happen?
- If your Partner does get interviewed, what do they do?
- Tell the truth and alienate your Family
- Or lie and risk legal problems.
Of course none of these things might happen, but then again…..
None of this will happen to us, we’ll be fine.
That’s totally your decision to make. So, what will your Partner do with those Cryptos?
- Will they move them to their own Wallets
- Or try to sell them.
You probably know that Crypto transfers are traceable from Wallet to Wallet. So, if and when your Partner tries to sell your Cryptos at an Exchange then your Partner’s identity can be uncovered. Either at the time or even years after the fact.
You may feel it’s unlikely your family would go to those lengths. I’d respond by saying that People will go to extraordinary lengths when they think they have been ‘ripped off’ and lied to.
Perhaps you left your Cryptos for a group of people.
- In this case everyone involved is now the keeper of everyone else’s secret. Sometimes people’s relationships change over time.
- It only takes a nasty divorce in the group, where the aggrieved Spouse knows the Family Crypto ‘Secret’ for everything to unravel disastrously.
- If the sums are large(ish) then Banks will want to know the source of this money.
- Even as little as a few thousand dollars can now require proof of funds paperwork.
- All the recipients also all have to all be discreet when handling these funds, or risk calling attention to themselves.If one recipient starts to spend extravagantly might that also create issues?
- If your Nineteen year old step-son who would not be a legal Heir suddenly buys a new Car shortly after your Death, how might the Legal Heirs of your Estate react?
Okay thats a lot of hypothetical discussion, what should you do now?
- Research the local Intestacy Laws where you live
- Decide if those laws give your assets to the people you want to have them.
- Regardless of the answer you need to ensure your Cryptos can be found should something happen to you
- You need to make an Inventory of your Assets (where you keep your cryptos and the related Wallet addresses)
- You need to leave instructions on how to access your Wallets (but not your Exchange Accounts unless you want to risk the issues we discussed earlier)
If this sounds like a lot of work or you do not know where to start then we have some good news for you.
- We are currently working on a free e-book that anyone can use to protect their Crypto Assets
- We also have an online Application ‘NestEgg’ due to launch in Q1 2020 which will automate much of the work involved in protecting your Cryptos from the unexpected
Please join our Mailing List and we will notify you when these options are ready for you to look at:
Disclaimer: 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 certified 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.