E287 How Long Does Probating Bitcoin Take in New York?
How long does probate take in New York if the estate includes bitcoin? As we talked about in a prior blog How Long Does Probate Take in New York, generally probate takes 15 months or longer; sometimes up to 3 years. Those numbers are actually on the lower side, because everything is more delayed these days.
Here we will discuss how a new-ish asset like bitcoin may add some delays.
How long does it take to become executor of a New York estate with bitcoin?
Typically, it takes about 3-6 months to file and get the court paperwork naming someone as executor. The reasons for the delays are:
- Collecting documents;
- Court delays; and
- Hearings before the court will decide who should be executor.
Even with bitcoin added to the mix, this step of the probate process will remain about the same. The only area where bitcoin would make any difference is the estimated value of estate on the probate petition. The executor may have trouble pinning down how much bitcoin the decedent had. Also, because bitcoin is a newer hot topic, the knowledge that the decedent had bitcoin could attract greedy heirs. “Hmm, Uncle Joe had bitcoin; maybe I should contest his will,” etc.
How long to settle an estate with bitcoin in New York?
Typically, it takes 15 months to 3 years to settle an estate. Settling an estate means the executor collects assets and pays debts and taxes to get the net amount to distribute to the heirs.
Of course, after 2020, everything has slowed down. Probate is currently taking much longer than mentioned above. Then, if you add a newer asset like bitcoin, a few more months may be added to the process.
The first reason is because of bureaucracies. Even traditional banks and brokerages are not great at handling decedent’s estates. It’s a constant game of phone tag. New bureaucracies (exchanges such as Binance, Kraken, Gemini, Coinbase) will probably struggle with processing the death claims. They may not yet know what they are doing, because they don’t have a well-oiled machine for this kind of process.
The next possible cause of delay is if your decedent held his own keys and own wallet. Taking custody of self-hosted wallet and transferring it to secure multi-sig estate wallet could be time-consuming. The executor would need a lot of education to know how to handle it. It may be wise to appoint an executor who is familiar with both probate rules and bitcoin custody.
Another cause of delay for the executor is deciding whether to liquidate the bitcoin (convert it to dollars). With other assets, you want to covert the assets to dollars as quickly as possible to avoid the risk of price fluctuations. But bitcoiners tend to be hardcore and may specify that they want the bitcoin (not dollars) to go to the heirs.
Lastly, taxes add time to the process. Besides estate tax, figuring out the capital gains tax can be daunting. Even just filing a regular income tax return with bitocin may cause your tax preparer and examiner to conduct additional research on the rules. As we discussed previously, getting tax clearance tax a long time, even without bitcoin.
How long to close an estate with bitcoin in New York?
Generally, the final phase (closing the estate) is anywhere from 3 months to 1 year. Again, the executor collects documents (statements, transcripts, and proof of what occurred during the probate process). Then the executor prepares the accounting, which are the books and records in a specific format required by the court. Lastly, the executor has to deal with any contests or objections to the will. Dealing with a contested will can add months to the final phase.
So, when the executor collects documentation of the assets, how does he document bitcoin acquisition? You can’t call a bank and ask for a ledger. You might be relying on screenshots. It’s not even clear if you can rely on the exchanges; you may have to reference the mempool.
How does the executor document bitcoin sale? Hopefully the sale was made on the exchange, and you can document it that way. After a sale, how does the executor protect himself and ensure the heirs that the bitocin didn’t lose value?
If you have an inexperienced person putting together an accounting and the court doesn’t accept it, much more time will be added.
We’ve tried to apply much of our probate knowledge to bitcoin situations. Let us know if you find this useful. Also check out my book, “How Probate Works,” to understand how probate works in general. Then, add to that all the complexities of probating an estate with bitcoin!
Request your free consultation
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.”