Bitcoin Forum

I love Bitcoin. I've been evangelizing it to just about everyone I meet and I've got a substantial amount of my personal money invested in the currency. I've put my money where my mouth is.  But, lately, I've been seeing some talk about using Bitcoin as a way to pass on wealth to heirs and that has me a bit concerned.

On the surface, using Bitcoin as a wealth protection and inheritance method sounds pretty amazing. But what about Bitcoin's long term viability? Granted, I truly believe the currency is going to survive the zombie apocalypse but what if it doesn't? What if I'm laying on my death bed and Bitcoin starts to crash hard? If I am lucid and physically capable, I could sell quickly to save some of the value, but what if I'm not?  It just seems like an pretty scary way for long term wealth protection.

Can anyone address my fears? I'm sure they're completely illogical but I'm not totally sure why. I know that fiat can (and probably will) crash long before Bitcoin but I still feel 'safer' (somewhat, not much) in passing it along in inheritance.

Anyone?

What if you sell quickly to "save some of the value" but then it comes back to where it was, and then goes higher?

This is the perpertual dilema of the forex trader.

The lifespan of the average fiat currency is 27 years. Bitcoin might be different, who knows. It's a gamble everywhere.

If you want complete peace-of-mind in your wealth, consider investing in something like gold or silver. Otherwise, currencies usually fail or deprecate. That's just life.

Or cans of pre-cooked spagetti.

After the zombie apocalypse, gold or silver will be worthless as you can't eat them, you can't sleep on them, you might get killed for them. Bitcoins will probably survive for the next 4 to 8 years. You can buy some now, and just watch it. You'll know if you need to sell or if you can keep it there, or even add to it.

And when a lot more merchants start accepting bitcoin, you can buy stuff with it.

Why would you care; just take the bitcoins with you instead of leaving them behind.

Seriously, you should have much better things to be thinking about.

There's a certain poetry in your bitcoins dying when you do.  I'm not a big fan of inheritance beyond sentimental items and it's an interesting way of "giving back" to the btc "community" by effectively redistributing value (by increasing scarcity).

Then again, if you're old and sitting on it, it's not doing anyone any good anyway.

Invest in a society that values life over money. Then you won't have to worry about the imagined value of arbitrary units of measure.

Fair warning, I'm doing an all night study session, words or phrasing might be awkward.

I can't see Bitcoins as something in the "fire and forget" category, at least for now. Let's be honest here, it's a fickle bastard that needs to be managed (if not micromanaged at times), and to a complete stranger being handed a thumb drive with nothing else than a wallet.dat file will probably end hilariously for those not involved.

There are a few things to do right now to be sure your beneficiary gets the information and access in the first place.

First of all, as with anything digital, be sure you have a Transfer-on-Death mechanic in play at some level, with secure triggers. Personally I opted for bank storage, along with relevant accesses to that and various online account with a lawyer. Poke around, there are many options to address this.

Next, since arbitrage of BTC is a bit funky at times, having to go through either one or many websites and methods to transfer the coins back into fiat, make sure your beneficiary has clear instructions on how to cash out. Depending on your financial position and that of the people you leave behind, rapid access to the funds to cover final expenses might be an issue. Even if not required, the people to whom you are transferring to might not be inclined to stick with BTC. Write down instructions on how to liquidate the assets.

Keep all of that updated, keeping in mind your wallet backup strategy and the ever changing bitcoin landscape.

After that, look into a biological testament, if you haven't already. If you have any doubt in the ability of the people likely to take care of you in case of an incapacitating medical situation to correctly manage your portfolio, consider adding the same transfer trigger in that document. Better they pull out right then and there while your assets are still fresh out of your management than leave them at the mercy of market forces unchecked. Rapid divestment into fiat might not be the most profitable move, but hedged against the risk of non-management I'll stick with the safe, boring route if my family is concerned.

Interesting thread though, I suspect that as time goes on these end of life issues will creep up more and more, it should be discussed. Longer term, when more established fund BTC institutions appear I guess the currency could be managed like any other asset by an external partner, but as it stands, I wouldn't thrust a newbie into our market, especially with the shadiness involved.

Loosing inheritance to stuff like a PPT after loosing a loved one would be a swift kick in the shins, at the very least. Caveat emptor, sure, but the common man doesn't have the street smarts to survive the current market with any large BTC amount.

EDIT: Oh, and in the case of a SHTF scenario (zombies and whatnot), if it relies on the internet, it's dead, BTC included. Period. This is a P2P currency after all, until there is some kind of mechanic that allows stand alone transactions, no go. For once Hollywood might be the best source of advice, take note of the stuff people always seem to need and hang out on a survivalist forum for a while.

+1

There are very few financial assets whose value has little chance to fade away with time.  Precious metals, real estate, shareholdings of multinational companies are some.

Then you have currencies.   I would not bet much on the value of the dollar or the euro.  Hoarding a large amount of fiat currency on long term would just be stupid, imho.   Bitcoin will beat them, hands down.

Interesting feedback.

I'm (hopefully) nowhere near the end of my life but I'm still interested in these issues since I do have a lot of significantly older friends who are also looking into Bitcoin. I've already gotten a few 'how can I will these' questions and, unfortunately, the small town CPA's they use have no answers.

I suppose something I should be pointing out about Bitcoin is that, even though many people use them as an investment, they really are nothing more than a currency meant to be spent. Wealth protection really isn't (or even should be IMHO) a feature of Bitcoin. That's why we have gold, silver, and other precious metals. Maybe my advice to them should be "use Bitcoin to avoid the government seizing, taxing, or controlling your money while you're alive but invest in precious metals for when you're dead'.

As it stands, since it's a rather volatile commodity and a techy one to boot, I'd go with that for general advice. Maybe it will change with wider acceptance (and more formal counselling options), so it's not impossible down the line.

Oh, no one has mentioned m-of-n escrow yet?

A robust will can be created in Bitcoin if you allow the 90-95% majority of your friends and relatives to unlock your funds when working together.

This is unlikely to happen with you still alive and well because you will have to be betrayed by 95% of your friends, and if that is the case you're better of dead anyway.

Another scenario when that could be useful is when you lose your private key. Your friends can recover your money for you then.

I usually recommend people keep gold for long term investments and pick up Bitcoin as a commodity IPO. High reward potential but still some risk. And I tell them to get ready to start using it as a daily currency once the BitInstant credit card comes out.

I was at Mike Hearn's talk at the London Bitcoin 2012 Conference about Smart Property and believe it should be possible to create a custom transaction or "contract" that would trigger on say, a death notice published on the web, and transfer your funds to the beneficiaries. Or any other script you can come up with.

Watch this interview with Mike about his talk: http://www.youtube.com/watch?v=q0ijVek0b58 (http://www.youtube.com/watch?v=q0ijVek0b58)

The wallet.dat file is between 80 kb to 128 kb. For sure it will be less than 1 megabyte.

Put a password.
Rar it. 7zip it. Burn it on CD, DVD. Save it on SD, microSD, USB and a couple of hard drives. Email it to yourself. Store it on DropBox, Google Drive.

Then print some paper wallet backups. Put in envelope. Seal it with wax. Put your seal on it. Engrave it on a stone or plastic or metal plate.

Bury them all in a faraday cage so they survive EMP.

When you die, you give all of those items, and how to access them (and the password). You're dead. It's their problem now.

Once a year, test all your media or renew all the backups so they are current. Or the cold-storage wallet doesn't change and you keep transferring bitcoins to them regularly. Still, I'd probably make a new wallet every 5 years.

Whats all this talk about cashing out? In a few years you can just pay with bitcoin, no need to cash out to anything.

Quantify the "few years" when we can buy most stuff with bitcoin? That is going to take a long time. Maybe you meant a few decades. Depends on what country you live in and how stable the government is, or how stable the banking system is, or how it's economy is doing.

While it's possible to envision a future where McDonald's will accept bitcoins for a hamburger, it is not as easy for the sidewalk vendor selling ice cream to accept bitcoin. For some things, you will still need cash.

I'll bury you in my yard, your yard, or your worst enemy's yard for enough BTC.

Heck, I'll do it now so you don't have to worry about the long term viability of bitcoin!

"Reeses's Humane Inhumation – Your Bitcoins Will Be Safe When You Are Moldy Worm Food."

That's an estate planning attorney question, not a CPA question.

I don't see anything about BTC that's fundamentally different from other currency - any competent estate planning attorney should be able to write a will/trust as appropriate that directs the person settling the estate to pay X to Y; whether the client wants X to be expressed as USD, BTC, or as a percentage of the residue of the estate is up to the client. If the attorney is unfamiliar with BTC, it'll probably just be easiest to express the intended gift as USD or as a % of the distributable estate, and let the executor deal with the BTC details.

Obviously, this will be a lot easier if the person(s) selected as the executor/administrator/trustee is familiar with BTC, or at least with technology generally. Alternatively, the client could suggest a helpful tech contact who could work with the fiduciary.

This will be more complicated if the client is hoping that their holdings can "fly under the radar" and avoid the possibility of taxation at death; a fiduciary who cooperates with that agenda is putting their own assets on the line, if there's actual tax due, and they don't pay it. This creates a blackmail/extortion opportunity. With the current US federal estate tax limit at $5.12M, there aren't so many people running around who need to worry about federal estate tax. Different states have estate/inheritance tax schemes, so that detail is state-specific.

With respect to BTC as an investment vehicle, I don't see how the possibility of death really changes things - either you view it as a sensible investment vehicle or you don't. The fact that the beneficial owner(s) may change doesn't seem very interesting to me, assuming the fiduciary has or can hire/arrange technical competence sufficient to manage BTC holdings. 

In many ways, BTC is easier to plan for than other assets, because there's no institution to fight with or demand that forms be filled out - it's more like having an envelope of cash, except that with BTC there's a public log of all transactions, so there's no meaningful argument about how much BTC the decedent held at death. It's not so unusual for envelopes of cash or sleeves of coins to disappear from decedent's houses/safes/safe deposit boxes shortly after death, and of course nobody has any idea what happened or where those assets went. With BTC, that confusion won't be so bad, though security of the private key(s) will always be interesting. If assets disappear shortly after death, the beneficiaries will be able to see that, and demand answers from the person(s) who had access to the decedent's key(s). This will be easier if the decedent makes a list of their addresses known to the beneficiaries - if there were a decedent who had any number of key pairs, it might take a long time (up to infinity) for their successors to identify all of the BTC's and get access to the private keys.

+1

This is the system I would try to create. Make 3 of 7 scheme. 7 sets of 200 QR codes that each reveal a private key. Keep 1 in the house, 1 in SD box and 1 encrypted on dropbox. The other 4 carefully distributed among friends & family (who are not familiar with the others). Don't tell them who else has codes. You can give a set to a relatively trusted forum member. If you ever die or get in trouble, your friends and family will start asking around.

Bonus: Make a deterministic wallet, and engrave 1/2 of the seed on a mountain in Las Vegas, the other on a large rock in Minnesota.

Bitcoin is a wild animal. One only has to look at its history to confirm that. It has skyrocketed in value, had a bubble, but overall continued to progress with perceived viability and value.

I don't believe those days are over. I still believe it's a wild animal. A successful 51% attack, for example, could crash Bitcoin confidence and prices. As you point out, there is no way to know how the zombie apocalypse will affect Bitcoin. However, these IMO are analyses for the short term, say within the next 5 or 10 years. In the longer term, overall, I believe the future is bright for Bitcoin because the fundamentals of it are solid. It solves the global problem of fiat banking in a way nothing else has or can. There is tremendous value in that. It's only a matter of time before the world comes to realize this. When enough of the population does then Bitcoin's value overall will be beyond question IMO (and beyond anything stopping it). That's why it can be viewed as long term wealth protection, or something to be willed away (or even a profit vehicle).

Now, on the other hand. I don't consider Bitcoin the end all be all when it comes to finances. I believe a person should be diversified. I think people should use precious metals as a base for store of wealth, and hold other currencies, including BTC, as suits their needs. Someone not technically very literate, for example, might keep a very limited portion of their wealth in BTC. That protects them from big losses from their own making, but also of Bitcoin itself.