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Here’s What Happens To Your Bitcoins When You Die

The value of bitcoin scaled new heights in 2017. If the trend continues, it is likely the digital currency will be around (bubble or no bubble) long after its investors are gone.

But, as you would a bank account or a house, can you pass on your cryptocurrency stash to your kids after death?

The short answer is yes — it just requires some planning.

Dr John de Groot of wills and estate law firm de Groots says it is an issue that the legal community expects to become more common, similar to other valuable “digital assets” such as Frequent Flyer points.

What is Bitcoin?

  • A digital cryptocurrency
  • It operates on a decentralised peer-to-peer network, with no central authority or government backing
  • They can be bought with fiat currencies like Australian dollars from online exchanges or created through mining

Most importantly, he suggests, your executor or heirs need to know about your digital assets in the first place, and how to access them. This is more tricky than passing on cash in a bank account.

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Cryptocurrencies are not backed by any government regulator. For the most part, they are not held by traditional financial institutions that know your name, address and other identifying details.

Instead, most people store and send bitcoin from an encrypted digital wallet.

Wallets often use two keys to allow the owner access: a public key that anyone can see and a private key (basically, a random set of numbers and letters that acts as a password).

“Many people who own bitcoin are giving up only enough information to get a registered wallet, but they’re not wanting to give up their names,” points out Philippa Ryan, a barrister and law lecturer at the University of Technology Sydney.

But if your inheritors do not know those keys, there is almost no way they can get your bitcoin.

It also depends on whether the person holding onto the bitcoin is keeping it intentionally secret — whether for a nefarious purpose or otherwise — or just private.

“It’s the same for people who hoard money in tax havens,” Dr Ryan adds. “If you do that and you die, you’re in trouble. Your estate is in a lot of trouble.”

So many assets are now stored online, fraud is also becoming easier, Dr de Groot warns. Online keys and passwords can give someone an extraordinary amount of access to your finances.

That means you need to think about how to securely pass on those details, whether you give them to a lawyer for safe keeping or to a trusted family member.

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Written by PH

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