E218 Bitcoin Letter of Instruction to Heirs
Every bitcoin estate plan must include a simple, easy-to-understand letter of instruction to your heirs or executor. If you don’t, all of your hard-hoarded bitcoin may disappear.
Articles and audion on New York Wills and Trusts
E214 Transferring Bitcoin Upon Death
Let’s review a real-world case study of a client’s plan to transfer his bitcoin upon his death. This looks like an elegant solution, so let us know if you see any major red flags!
Cloned wallets and sharded seeds
The client’s plan focused on clone wallets and sharded seeds.
The plan starts with two clone hardware wallets. A hardware wallet is like a minicomputer that plugs into your USB drive, but it is not fully connected to the internet or the computer. It keeps your private keys/secret codes offline while allowing you to interact in online transactions. When you clone your hardware wallet, you make duplicates of it. Each clone wallet is password protected.
The client gives one clone wallet to his executor. He gives the other clone wallet to his sister (who is an heir). Neither the executor nor the sister has the PIN to the wallet. They just have the device. They will receive the PIN upon the client’s death either by dead man’s switch or from another heir.
Then the client shards his seed phrase. Remember the seed phrase is 12 or 24 secret words that you can use to recover your cryptocurrency if something happens to your hardware wallet.
The client has divided his 12 words into two chunks of 6. The client gives half of those seed words to his executor. The executor won’t receive the second half of the words until the client dies.
Upon death, the executor will receive the PIN code to his clone wallet and then he has access to the cryptocurrency. The back-up plan is that the sister receives her PIN code from another heir or dead man’s switch. Then she has access to the cryptocurrency. In the event of hardware failure, the executor will receive the second half of the seed words to recover the hardware wallet.
Risk of theft vs catastrophic loss
Plans need to balance risk of theft vs. risk of catastrophic loss. You are twice as likely to lose your cryptocurrency than to have a hacker steal it from you. It is more complicated than memorizing a PIN code. You don’t have the safeguard of calling a bank to reset your PIN. It is also easy to over-complicate things and make it too difficult for your heirs. There might be security holes in your plan, but are they big enough to merit increasing risk of catastrophic loss?
Redundancy, and balancing risks
Using multiple hardware wallets is tangible and understandable. A hardware wallet is a device, and it needs a code to access the cryptocurrency. If hardware wallets fail, then you can always shard the seed phrase.
By using cloned wallets, there is a slight increase for the risk of theft. In this case, the client accepted the increased risk of theft to decrease the chance of his cryptocurrency disappearing upon his death.
While this plan isn’t perfect, I like it. Please pick it apart – I want to hear your feedback. We might not be hard-core “bitcoin-ers,” but we do know what happens when people die! Being an executor is not easy. If you add cryptocurrency to the executor’s job, it’s definitely harder. It will be interesting to learn more as people die holding cryptocurrency.
If you want to learn more about probate in general, please check out my book, “How Probate Works.” I don’t have a Bitcoin chapter yet, but you will get a sense of how the probate process applies to your Bitcoin situation.
Request your free consultation
New Client v3 Free Probate Chapter
"*" indicates required fields
Sign-up for your free consultation using the form above, and I’ll be happy to email you a free chapter from Anthony’s best-selling book “How Probate Works.”
E213 What if Witnesses to Will Cannot be Found?
We’ve talked about mistakes when choosing the witnesses to your will (5 Mistakes With DIY Wills and Witnesses), but what actually happens if you can’t track down a witness during the probate process?
E211 Use a Personal Property Memorandum to Bequeath your Stuff
Many people make this mistake with personal property when creating their estate plan: They include a long laundry list of the tiniest items in their official, legal will.
E210 How to Administer a Bitcoin Trust
In Episode 206 we talked about how to set up a trust. This time, we’ll talk about how to manage a bitcoin trust as the trustee.
E201 Should I Name a Trust as Beneficiary of My Accounts?
Another question that we receive often is “should I name a trust as beneficiary of my estate?” In a recent case, Rhonda reached out to us, because she wanted the benefits of a trust (avoid probate, reduce chance of a “will contest,” etc.), but she was not quite ready for the headache of a full-blown trust setup. In her particular situation, naming her trust as beneficiary makes sense. If you are considering this doing this, here are a few things you should consider.
E193 What Happens When Your Partner Dies and You’re Not Married?
It’s not uncommon for couples to forgo marriage. Instead, they choose to live their lives together as partners and significant others. But what does that mean for the other person when their partner dies?
E187 3 Best Free DIY Will Software
Many folks who ask me to be their executor, make their will using do-it-yourself methods. So here are some tips on how to maximize the chances your estate plan will actually work.
E186 Who Will Bury Me If I Have No Family?
This is an important question for Solo Agers, or for anyone without family nearby.
E183 Did Her Estate Plan Work? A Solo Ager Example
Let’s take a look at a real world example of whether a Solo Ager’s estate plan worked towards the end of her life.
Ms.H’s Plan: DIY Will + Professional Executor
Background
Ms. H is a solo ager (unmarried, no kids, over 60 years old) who’s been estranged from her closest relatives (siblings and nieces and nephews) for decades.
She made a do-it-yourself will leaving everything to charity. Thankfully, she hired a lawyer to supervise her will signing.
Ms. H named me her professional executor in her will, and over the past 10 years her wishes have remained largely the same.
Recently
Sadly, age has caught up with Ms. H, and she was recently hospitalized for lack of self-care. Her doctors agree they cannot discharge her to live alone anymore, so we’re making arrangements for Ms. H to move into assisted living.
She’s understandably anxious about all this, and even contacted her long-estranged niece and asked her to visit.
What Went Right with Her Plan?
Ms. H avoided a few problems by naming me her professional executor.
First, she won’t have to deal with any “court-appointed strangers,” such as a guardian. Instead, she can turn to me, someone she’s chosen and has a relationship with.
Second, she felt comfortable reaching out to estranged family, without fear they’d try to sneak into her inheritance. Since Ms. H already has a will and an attorney-executor standing by, her niece has focused solely on reconnecting with Ms. H emotional, not financially.
And lastly, Ms. H’s doctors, hospitals, and social worker have all been grateful to have me as a main point of contact for her care.
What Went Wrong with Her Plan?
Her plan does have a couple of weaknesses.
Since an executor steps in after death, I don’t have authority to help Ms. H now. For example, I can’t help make financial arrangements for her to access a better assisted living. She much choose among the options thru Medicare.
Also, if unscrupulous and aggressive family comes out of the woodwork, I have fewer tools to fend them off. We’d have to battle in court, which could waste Ms. H’s time and money, and cause her stress.
Why a Trust Could Have Been Better
If Ms. H had made me trustee, I’d be better to avoid any court-appointed strangers for her. And more ability to upgrade her care, and deter unwanted family, without having to go to court.
FREE Copy of “The Solo Ager Estate Plan”
Complete this form to receive your complimentary copy of Anthony’s Amazon best-seller, “The Solo Ager Estate Plan”
Solo Ager Book v1
"*" indicates required fields
Recent Posts
