Although planning for death can be a difficult topic, it is necessary if you want your bitcoin wealth to be passed on.
This opinion editorial is by Jenna Bunnell (senior manager, content marketing at Dialpad).
It doesn't matter what you think about bitcoin, but it is clear that it will be around forever.
Bitcoin is a peer-to-peer virtual currency that has been widely accepted in many countries. You can trade your bitcoins with other peers or sell them for cash.
It is virtual currency so the question remains: what happens when you're gone? Although it may seem a terrible thought, it is essential to plan for your loved ones and family. What happens to bitcoin after you die? How can you include BTC into your inheritance plans? Is it as easy to include bitcoin in a will as you would with other tangible assets like your house or bank accounts?
What is Bitcoin?
Image taken from kyivpost.com
In 2008, a white paper entitled " Bitcoin: a Peer-to–Peer Electronic Cash Systems " was published. It was written by Satoshi Nakamoto. This name is assumed to be a pseudonym and may even belong to more than one person. The white paper's purpose was to create a digital currency that could exist without the restrictions of central banks and governments.
It is based on peer-to-peer technology and high encryption (based upon the SHA256 algorithm developed by the U.S. National Security Agency). Every transaction is recorded on publicly accessible ledgers located on servers all over the globe. Anyone with a computer can create one of these nodes.
Each transaction is broadcasted to the network and shared among nodes. These transactions are collected approximately every 10 minutes and put into a block.
Many people believe they must buy complete units. However, BTC can be subdivided up to seven decimal points, making them smaller and more affordable — sats.
Once you have purchased (or mined) bitcoins you will keep them in your digital wallet, which you can access with special software. These coins are not real-life currency and ownership is determined by agreement between members of the network. So how can you determine what happens to your bitcoins when you pass away? Many BTC owners keep their key to their wallet safe and don't keep any other records. What happens if someone suddenly passes away?
Image taken from news.gallup.com
Although it's not something you want to think about or talk about, death is inevitable. Only half of Americans have made a will. However, this number varies by age — more than 75% of those over 65 have made one, while only 20% of those under 30 have.
It can be confusing from a U.S. legal perspective. The IRS does not view cryptocurrency as currency, but as a tradable commodity that can be taxed. However, we consider them assets and must ensure that they are protected from inheritance.
The Revised Uniform Fiduciary Access to Digital Assets Act, (RUFADAA), provides oversight and control. This law was created to give relevant parties (such fiduciaries or lawyers) clarity and a legal method of dealing with digital assets that are held by an estate of a deceased person (or when a person becomes incapacitated).
The Uniform Law Commission (ULC), wrote the law so that states could examine it and then adopt it. The law was enacted by 47 states as of 2021. For the United States, at least, there is a framework for managing digital assets. This will be a relief for many who were previously uncertain.
What is RUFADAA?
First, you need to consider the following three groups who are interested in what happens:
- The digital asset owner who may wish to maintain some privacy.
- These assets are held by the custodian (businesses that make, store, or sell online assets).
- The fiduciary, or attorney who deals with the estate.
The main obstacle to the law was that digital assets are not as easily accessible as physical assets. There were no laws in place that would clarify access to digital files or wallets in case of incapacitation or death. The sad truth is that digital assets could become lost forever if the original owner did not leave a note detailing how to access them.
RUFADAA does not focus on cryptocurrency, but all digital assets. This includes accounts such as Google or Facebook. Custodians have certain rights regarding what information they can release and whether they need to request a court order. Facebook accounts are an example of what the custodian has the power to decide what information is necessary.
RUFADDA and Bitcoin
Image taken from uniformlaws.org
RUFADAA applies only if the original owner has granted access to their bitcoin. This can be done through documents signed by and held by custodians, or it could be in the form of a legal instrument such as a power of attorney or a will.
The custodian may also restrict the access that your fiduciary can have, usually to allow them to carry out their responsibilities. Access they grant can also be subject to administrative fees. If you want to know what happens to your bitcoins after you die, this information can be very important.
RUFADAA's main benefit is its ability to clarify the legal hierarchy in relation to the documentation and distribution of digital assets. RUFADAA regards the custodian, or online management system, as the highest authority in relation to cryptocurrency accounts.
This means that if Person A is named as the beneficiary of your digital assets in a document you signed with your custodian then that document will prevail over any other legal avenues like trusts, POAs, or wills. If there is no beneficiary agreement between you and your custodian then ownership will be transferred to the person named in those normal inheritance documents.
If there are no custodian agreements or normal agreements, the custodian may establish any transfer of ownership and fiduciary liability.
What should you do?
Image taken from ucf.edu
There are two options when it comes to what happens when you die with bitcoin.
Ask your custodian for specific tools and a framework to name a beneficiary to an account. This would only be applicable if your bitcoin was held on an exchange. You can also go the traditional route, and name your beneficiary to your BTC under POA, in wills, or in estate documents.
You should consider creating a plan that covers all aspects of your digital assets, especially if your estate includes Bitcoin (or other cryptocurrency). This is a plan that allows you to pass all information, such as account details and keys, to anyone you wish to inherit them or to your fiduciary/attorney.
You must include instructions for the transfer of any data in any will or similar document. This includes sensitive data. The beneficiary will not be able to control the account by simply passing the hardware device.
Many people are still skeptical that Bitcoin is a true currency, despite its rapid growth. Despite its growth, figures clearly show that BTC is here to stay.
Any bitcoin that you have should be considered an asset. It may not be as tangible as a house or car but it still has real worth. You should think carefully about what happens to your bitcoin if you become incapacitated or die. You can make sure your assets are passed to those you choose by knowing the steps and what happens to bitcoin after you die.
Jenna Bunnell contributed this guest post. These opinions are not necessarily those of BTC Inc.
By: Jenna Bunnell
Title: What Happens To Bitcoin When You Die And How To Include It In Your Will
Sourced From: bitcoinmagazine.com/business/what-happens-to-bitcoin-when-you-die
Published Date: Sun, 11 Sep 2022 01:00:00 GMT