What Happens to Bitcoin When I Die?
Just like any sort of asset, it is important to make provisions for your Bitcoin in case of death; don’t go to the grave with a digital fortune.
Unlike retirement funds or even savings accounts, no one needs to know that you own them, or how much you have in them or indeed how to access them without you. Bitcoin provides a safeguarded space for the store of wealth that can be kept secret from everyone.
It is one of the attractive features of Bitcoin for some, but it also means that it is all too easy to take a fortune of digital currency to the grave.
There have been some recent examples of people dying without making provisions for their Bitcoin fortune, which can lead to some sticky situations for the next of kin to try and claim it.
Inaccessible small fortune
In a recent case, a man in Colorado passed away leaving more of a burden and debt for his family to sort out than an inheritance - or so they thought.
Turns out, the man had been investing in Bitcoin back when it was nearer to $13 a coin, rather than the $4,000 it finds itself at today. His Bitcoin fortune was stored in a virtual wallet, which provided its own problem.
This man had been using Coinbase as a wallet which was one of the reasons that his family was able to claim his money.
Upon reviewing his bank account, which revealed debits to Coinbase, his family with documents in hand approached the exchange, which confirmed the existence of a wallet and is now in the process of transferring its contents.
Of course, this can lead to many issues with fraudsters using fake death certificates and other documents to make claims on certain customer’s Bitcoin wallets.
Power of private key
Of course, this instance was reliant on Coinbase accepting his family’s story and opening his wallet for them, but there is another way to secure the future of your Bitcoin fortune for your next of kin.
The private key of a wallet is the access pass for a wallet but is not always handed out by some of the more popular online wallets.
If a Bitcoin owner dies without passing on the private key, his heirs may discover his wallet only to realize that they will never gain access to the wealth inside. To prevent this, the owner simply has to ensure that someone gets a copy of the private key by writing it down, storing it on a flash memory drive or entrusting it with a commercial service that manages them.
There are of course instances, where Bitcoin can be lost forever, should a holder die and not make it know that he owns the digital currency. Because there is no forced taxation attached to Bitcoin, executors cannot even use that to locate assets.
The Bitcoin situation can be likened to a time when people died with stock certificates in shoe boxes — sometimes they would go unnoticed for decades until the corporation that issued them concluded that nobody would redeem them and turned them over to a state government’s unclaimed property division.