Currently making the rounds in the financial world is a story about a Colorado man who died suddenly this year, leaving behind a Bitcoin investment worth a small fortune. The problem: his family didn’t know about the account until after his death and had no idea how to access the funds. Unexpected deaths, especially intestate ones, often cause families to scramble, and the financial ramifications can be stressful. With the rise of new forms of investment like cryptocurrency, intestate matters become a lot more complicated.
For starters, Bitcoin and other digital currencies are just that — digital. Protected by cryptography and blockchain technology, this investment method is increasingly attractive. Compared to traditional banking, digital coin companies are, so far, virtually hack-proof, in addition to offering a level of anonymity. The owner of the virtual wallet has a “private key”, allowing only him or her access to the funds. Unfortunately, if the owner passes away without leaving the key to a loved one, the funds may be lost forever.
Moreover, cryptocurrencies pose other risks. Con artists love transactions that are shrouded in shadow, an environment cultivated by digital coin companies. As a result, many consumers have fallen victim to fraud. In fact, the Securities and Exchange Commission (SEC) released a warning in July about “initial coin offerings” (ICOs), which use digital currency to buy company stock. Due to the unregulated nature of cryptocurrency and ICOs, many of these offerings are scams, such as OneCoin, exposed as a Ponzi scheme. Phishing attacks are also on the rise, fooling victims with fake ICO pages.
Other concerns revolve around the basic premise of digital wallets. Like other currencies, cryptocurrencies have value because people assign them value. Declining interest could cause declining worth. In September, South Korea’s decision to ban ICOs led Bitcoin’s value to drop 3% and Ethereum’s 6.5% within 24 hours. Clearly, digital currencies are at the mercy of market forces. The hype is high now, but what if it dies down?
Nonetheless, more and more people are not only investing in cryptocurrencies, but also incorporating them into their long-term financial and estate plans. The latter aspect is a crucial consideration if you decide to invest. Just as we now must include access information for social media, e-mail, and cloud accounts in estate planning documents, digital wallet keys need to be a part of your plans for after death.
To ensure you actually have something to leave behind, verify the legitimacy of the company taking your money. A legal professional can offer advice on both where to invest and how the investment will impact your estate plans. Call the estate planning attorneys at Bellah Perez, PLLC at 602-252-9937 to help you with the homework, spotting the schemes and the opportunities.
Disclaimer: The answer is intended to be for informational purposes only. It should not be relied on as legal advice, nor construed as a form of attorney-client relationship.