LegalVault® Offers Solution to Estate Planning Challenges of Bitcoin and Cryptocurrencies

Cryptocurrency and blockchain technology are approaching mainstream, with more people appreciating the unique investment attributes of Bitcoin and other cryptocurrencies. Advisers  and owners, however, should be aware of the potential pitfalls these assets present in estate planning. 

Typically, an owner will want to ensure that these assets transfer appropriately upon death, but this desire must be balanced with the desire or need to retain control of the asset as long as is possible.  Like cash in hand, availability and access to cryptocurrency keys and passwords means the power to direct, spend, liquidate, or transfer the asset. Therefore, the challenge is in ensuring that one does not prematurely relinquish the keys to the  cryptocurrency.

When a person buys bitcoin, it’s associated with crypto-graphic public and private keys. The public key identifies that specific bitcoin and all of its transactions on the blockchain—a public ledger that records transactions on a network of decentralized computers across the world. The private key is the owner’s secret.  The private key proves ownership and authorizes transfers. The private key typically remains secret until the owner passes away, otherwise anyone could steal the cryptocurrency.  

Cryptocurrency can be held in online exchanges, software wallets or hardware wallets, each requiring a slightly different planning perspective. Hardware wallets are similar to USBs and an estate plan needs to spell out where the device is located and the necessary seed phrase. Cryptocurrencies other than bitcoin are becoming common and securing significant capitalization:

Each form and brand of cryptocurrency has unique features that require specific communication to and deployment by an owner's fiduciaries or family.

The challenge with most planning methods, such as software or hardware wallets is that the physical or virtual location must be provided to counsel and/or fiduciaries, otherwise the asset is inaccessible and may lost. The owner may not desire to provide this information to either, since access means the ability to direct funds. Physical wallets are also subject to risks such as loss, damage, or destruction, even if they are known and identifiable. If they are not known or identifiable by fiduciaries or counsel, even if working, they are useless to discover and direct assets.

LegalVault® is a great tool which allows you to safely and securely store your cryptocurrency's key, along with your health care and advance directives, and your estate planning documents.  The brilliance of the LegalVault® program is that each type of document or information is treated specifically for the discreet needs of the owner: health care directives are available to third party health care professionals during the owner's life; estate planning documents are available to the owner's fiduciary and legal counsel during the owner's life; but keys and passwords are inaccessible to everyone but the owner, and only become available upon the owner's death or permanent incompetency or incapacity. 

Even if an owner does not have a complete or comprehensive estate plan, LegalVault® provides a cryptocurrency owner the ability to safely and securely keep, store, and maintain passwords and keys, while providing an elegant solution to prior notification to the fiduciaries and counsel of the existence and location of, and access to, passwords and keys.    

Here’s how LegalVault® works when used by a cryptocurrency owner who has a comprehensive estate plan:

• Each  owner is given a secured LegalVault® account created specifically for the owner;
• Our firm, or your lawyer, uploads the image of the owner's health care and advanced directives to the owner's LegalVault® account;
• We immediately print a temporary Emergency Access Card, and LegalVault® shortly thereafter sends out a durable Emergency Access Wallet Card which contains instructions for healthcare providers on accessing healthcare-related documents online or via a 24/7 fax back service;
• Once an account has been created, the LegalVault® physician notification system sends a notice to the primary care provider informing him or her of this invaluable service and the storage of advance directives, ensuring that these important planning documents never fall to the back of a medical chart where they go unnoticed for weeks; 
• The owner controls what information is available to health care providers, and can quickly update the account with up-to-date documents or information (such as medications or allergies) from their home computer or smart phone;
• With the owner's permission, images of other estate planning and legal documents (Wills, Trusts, Powers of Attorney, Competency Directives, Rights of Sepulcher, Deeds, Contracts, etc.) are uploaded to the owner's LegalVault® account; 
• Owners can log in to their accounts to share other non-healthcare-related documents with our firm, or even upload copies of family keepsakes (photos, home videos, letters to children, family trees) to ensure these are safely secured and passed down to younger generations;
• Owners can keep or maintain important legal and financial records such as insurance policies, annuities, savings bonds, stock certificates, leases, contracts, and other instruments, potentially lost, stolen, discarded, or destroyed by third parties at a time of death or disability;
•  Owners can alert authorities of significant needs or concerns, such as "disabled child at home," "pets at home," or the like;
• A separate vault, inaccessible to legal counsel, inaccessible to other professional advisers, and inaccessible to family and friends, and accessible only to the owner, and an owner's executor, successor trustee, or personal representative upon the owner's death or incompetency, can store passwords, keys, and/or seed phrases to bitcoin or other cryptocurrencies, as well as other online investment and bank accounts, along with combinations and instructions for physical storage devices such as safes, lockers; storage units, and the like;
• Upon renewal of the LegalVault® account (every 3,5, or 7 years) updated documents are executed, ensuring that the documents and information are never out-of-date.

There is no limit to the storage space available for estate planning documents, pictures, letters, financial documents, and the like.  The cost of such a service is probably less than you might imagine. Contact us if you want to add this valuable service to your estate and/or financial plan. 

For more information regarding estate planning needs for bitcoin and cryptocurrencies, please consider the following excellent article: Angela Morris,  "With the Rise of Cryptocurrency, Estate Lawyers Caution that it Shouldn’t be Treated like any Other Asset," ABA Journal, November 2018.