People are increasingly diversifying their assets to include bitcoin and other cryptocurrencies. They are popular in part because they allow anonymity for the buyers who purchase them on an exchange.
Although they're known as "virtual" currencies, they have real value. Therefore, many people would like to pass them on to heirs as part of their estate. The anonymous nature of cryptocurrency transactions, however, can make that complicated. The exchanges on which bitcoin and other digital currencies are bought and sold don't ask for beneficiary information.
How do you leave your cryptocurrency to loved ones when you die? That's something that attorneys are increasingly asked to help their clients handle. As one estate planning attorney who deals with digital assets says, "Even though it exists in this virtual world of 1s and 0s floating around, it is property."
One wealth planning professional advises, "People need to document that they own it, where they bought it, and how someone can get access to it." Access requires having your "private key," which is encrypted. The information about the cryptocurrency needs to be included in your estate plan. Otherwise, your family will have to deal with it in probate court.
Unlike other types of unclaimed property in Maryland, which goes to the state, if no one is able to access someone's cryptocurrency after he or she has died, "it's gone forever," according to the estate planning attorney.
If you have bitcoin or other cryptocurrency, it's essential to think of it as you would any other asset that you want to leave to heirs or other beneficiaries. However, you need to do everything necessary to ensure that it is accessible to the person who will be executing your estate and that you have documented it properly in your estate plan. Consult with your attorney on how to do this.
Source: Barron's, "Bitcoin Should Be Part of Estate Planning, Too," Abby Schultz, Feb. 01, 2018