‘What happens to my Bitcoins when I die?’
It’s no surprise that in a digital age the question of ‘what happens to my bitcoins when I die?’ has been brought to our attention. Bitcoin is cryptocurrency, which is a form of digital currency, which of course means there’s nothing tangible to be had. You can’t go to the bank and withdraw X amount of bitcoin and you don’t keep it in your wallet. So where exactly is it kept and how can you access it?
Bitcoins are stored in a virtual wallet, and this virtual wallet has two keys – a public key and a private key. The public key is just a string of characters and is visible to anyone as an address for sending and receiving cryptocurrency, whereas the private key is what allows the owner to access the wallet’s contents. This means that if you as the owner were to die without leaving the details of your private key to somebody, the contents of the virtual wallet could be inaccessible. You could still theoretically gift your bitcoins to a family member or a friend much in the same way you would money from your bank account, but the danger is that the private key to access the wallet could simply be disregarded, or its importance not understood by the executors or beneficiaries.
The real difficulty is in how you leave your private key behind, and making sure you give clear instructions to the person who you wish to have access to your wallet. You could scribble it down on a piece of paper for safe keeping, but there’s absolutely no guarantee that this will be accessible in the future. You could store it on a memory stick, or somewhere on your computer, but again, you’ll need to ensure that somebody has access to these, and no doubt you’ll change computers multiple times in your lifetime along with countless password changes. In such cases, some estate planners are turning towards virtual storage facilities such as the Safe4 Digital Inheritance Vault in which you can store things such as passwords and access codes, even photos, family recipes and much of the sort. With such a system, you only need one set of login details to access all the information you wish to be known for when you die which could make the distribution of your estate much easier.
If you do have a virtual wallet full of your hard-earned Bitcoins then you will no doubt be needing a Will to ensure that you can gift your wallet to somebody of your choosing. With the value of a single Bitcoin being almost £4,000 at the time of writing this article, it’s certainly not something you’d want to be missed out of your estate. You will also need to bear in mind that Bitcoins are recoverable and identifiable, as such any Bitcoins you have stored in your virtual wallet will be liable to Inheritance Tax on your death.