What Happens to Your Crypto When You Die?
What happens to your crypto accounts when you die? Unless the digital currency is held with a US-based company with the right type of account parameters, probably nothing.
We recently represented the family of a cryptocurrency enthusiast who passed away holding hundreds of thousands of dollars in various cryptocurrency denominations across multiple platforms. The deceased planned ahead and was meticulous about keeping accurate records; his passwords and “keys” were kept in a safe deposit box and he was careful to make sure his survivors could access his phone to assist in the dual-factor authentication.
After he passed, the first step was to gain access to the sites and “wallets” that held the various crypto denominations. This required his login information for each account, the “keys” for those accounts, his cellphone for dual-factor authentication, and in some cases, the login information for various email addresses that required email confirmation of the decedent’s identity.
The crypto sites, hyper-focused on securing the cryptocurrency for the living, ignore the fact that: deceased people can own things too; and some of the living become dead. Any direct assistance from their staff would only occur with the decedent himself, and only after photographic ID verification.
In this case, we successfully gained access to most of the digital currency, only to be met with another challenge: liquidation of the digital currency and transfer of the funds into a traditional bank deposit account was required. The crypto companies required that the account be owned by the deceased individual, but his accounts were frozen because he was dead. Both an estate checking account and an attorney client trust account failed the identity verification procedures of the various platforms.
We considered wallet to wallet transfers, which could be made to another living individual. That measure, however, presented its own set of problems, particularly in formal or contested estates. In such cases, no individual wanted to take money in their own name prior to court-approved distributions.
The crypto-after-death story is an ongoing saga. From our case, we have learned that in the digital currency game, two critical ingredients are missing that would otherwise allow probate and estate planning lawyers to solve the transfer after death problem:
§ Most crypto companies operate outside of the law for our purposes. State court orders and subpoenas directing the release of money are not effective in the Cayman Islands.
§ The industry standard is for crypto to be owned and controlled by a living person only, and a third-party representative like a personal representative or trustee will be ignored.
Companies like Coinbase have offices in the US, appear to have a registered agent in Michigan, and advertise products that allow for transfer on death procedures. If you want to hold crypto and want it to pass to your loved ones at your death, get it out of the Cayman Islands and into the right type of account -here in the US if possible- right away.
The more crypto is amassed by investors, and those investors die, the more familiar the probate courts are going to be in dealing with such assets. Prudent investors will keep as much account information handy as possible so their designated beneficiaries can administer their trust or their estate upon death.
If you or a loved one has a probate problem dealing with digital currency after the owner’s death, give us a call to schedule a free consultation. We can develop your best options and get you squared away.