What would I do with Bitcoin in my will?

[Firefly]

Hi,

Another question if I may and this relates to the concept of Bitcoin being a store of value. How do I pass on my Bitcoins to my next of kin? With cash, shares, property and most other assets I can put them into my will and upon death my solicitor can divvy out the goodies. As much as I like my solicitor I would never send him my Bitcoin wallet details as, given the nature of Bitcoin, he could very well siphon off my coins in a few minutes and I would have a hard time even proving he did it. I trust my family more than my solicitor but what's stop one of them doing the same? What If I too lose my marbles and cannot for the life of me remember my account/password details? What happens then? What happens to these coins that don't end up belonging to anyone?

Firefly.

 

[ant dee]

How do I pass on my Bitcoins to my next of kin?

Off the top of my head, you could set up what is called a MultiSig wallet.
For example, it could have 3 private keys, and at any time 2 would be required to sign a transaction. You keep one, your solicitor another and your next of kin (executor?) the third.
You could complicate things more by further encrypting the private keys and giving the encryption keys to some other trusted party.
In the end I believe you do have to trust that the whole group of trusted parties won't conspire and steal from you...
There is interest in this subject and more solutions will be created, if they have not already.

In case of forgotten / lost private keys, bitcoin will remain dormant indefinitely. In other words bitcoin is lost.

 

[Firefly]

Off the top of my head, you could set up what is called a MultiSig wallet.
For example, it could have 3 private keys, and at any time 2 would be required to sign a transaction. You keep one, your solicitor another and your next of kin (executor?) the third.
You could complicate things more by further encrypting the private keys and giving the encryption keys to some other trusted party.
In the end I believe you do have to trust that the whole group of trusted parties won't conspire and steal from you...
There is interest in this subject and more solutions will be created, if they have not already.

In case of forgotten / lost private keys, bitcoin will remain dormant indefinitely. In other words bitcoin is lost.

Not being smart, but what happens if my solicitor loses the password? He won't know he has lost it until he goes looking for it which will be when I buy the farm.
What happens then?

With a standard will, my solicitor can lose his but it doesn't matter, herself can have a copy and anyone else for that matter, because it is worthless until I am dead. Unless I have a very complicated estate it will all go to my family anyways.

With Bitcoin I am relying on my solicitor to have good record keeping, this MultiSig wallet you mention being around in 40-50 years time (hopefully), my wife (if she outlives me) being versed in Bitcoin transactions and this MultiSig wallet etc.

Do you really think estate planning which relies on Bitcoin as a store of value is feasible?

Firefly.

 

[Galway21]

You could be doing your beneficiaries a great dis-service given the great volatility of its value. At probate, the market value of your bitcoin could be €1 million, but by the time it sold its market value might be only €10,000, leaving your beneficiaries with a €330,000 CAT bill to pay, but no funds!

 

[ant dee]

Not being smart, but what happens if my solicitor loses the password? He won't know he has lost it until he goes looking for it which will be when I buy the farm.
What happens then?
Firefly.

I would imagine if 2 out of 3 of the keys are lost, the bitcoin is lost.
As for the technology getting outdated, I doubt that can happen. Anyway you would make at least annual audits of your backup plans would you not?
You can have a fast read here
https://coinjournal.net/7-steps-estate-planning-bitcoin-digital-assets/

Now, what you appear to be really looking for is some kind of institutional and government reassurance am I correct? And this pushes us away from the bitcoin 'be your own bank' mentality.
I guess a custodial service like Coinbase could handle this but I can't see who would
a) Leave Bitcoins in their will
AND
b) Leave those Bitcoins on a third party custodial service.

You could be doing your beneficiaries a great dis-service given the great volatility of its value. At probate, the market value of your bitcoin could be €1 million, but by the time it sold its market value might be only €10,000, leaving your beneficiaries with a €330,000 CAT bill to pay, but no funds!

If that is accurate it is a flaw of the inheritance and CAT system, and not a flaw of Bitcoin.
If you get €1m of Ryanair shares at probate, 3 flights crash the next day and the value drops to €10k, do you still have to pay €330,000 CAT bill?

 

[fpalb]

It's a good question, I think up until now people were generally more concerned about whether bitcoin would be around next year than worrying about estate planning for decades ahead. ant dee has already given good responses, I'll add that multi-sig functionality is native to bitcoin itself, it's just not a feature provided by a company or a specific wallet, so it will be around for as long as bitcoin is. How you leverage that to protect your coins is up to you, the lengths you need to go to might depend on how many people you really trust, how much btc you have etc. You get to choose how many keys there are (the limit is 16 I think) and how many are required, If you create a multi-sig wallet that is 4 of 7 for example, you can afford to lose any 3 of the keys.
You could also use other techniques such as dead man's switches or time-locked transactions (which are also natively supported). It's for sure not straightforward to have a fool proof plan, but it's also flexible, you don't need to involve solicitors at all if you don't want to for example.

 

[Duke of Marmalade]

If that is accurate it is a flaw of the inheritance and CAT system, and not a flaw of Bitcoin.
If you get €1m of Ryanair shares at probate, 3 flights crash the next day and the value drops to €10k, do you still have to pay €330,000 CAT bill?

That is not a fair comparison. Your family home could also be hit by one of those crashes. Galway makes a good point but it is really just an example of the general consensus that currently bitcoin is a terrible store of value. As I asked before, who is saving for a deposit on a house in bitcoin?

 

[fpalb]

As I asked before, who is saving for a deposit on a house in bitcoin?

Off topic, but this is a very funny question to ask any long time bitcoiner.

 

[Firefly]

I would imagine if 2 out of 3 of the keys are lost, the bitcoin is lost.
As for the technology getting outdated, I doubt that can happen.

I would say the technology is outdated already! If it keeps going at this rate we will probably need to burn the Amazon rainforest to keep mining!

Anyway you would make at least annual audits of your backup plans would you not?

What about if I am not able to? What if the marbles start to get a bit loose. What happens then? I could easily just forget my password

Now, what you appear to be really looking for is some kind of institutional and government reassurance am I correct? And this pushes us away from the bitcoin 'be your own bank' mentality.

Not really. I am asking how can I pass on my bitcoins to my next of kin in any way that resembles a standard will.

I guess a custodial service like Coinbase could handle this but I can't see who would
a) Leave Bitcoins in their will
AND
b) Leave those Bitcoins on a third party custodial service.

I agree. Coinbase could be gone next year, and I would certainly expect them to be gone in 30 years time. And with them goes my keys.

 

[Firefly]

It's a good question, I think up until now people were generally more concerned about whether bitcoin would be around next year than worrying about estate planning for decades ahead. ant dee has already given good responses, I'll add that multi-sig functionality is native to bitcoin itself, it's just not a feature provided by a company or a specific wallet, so it will be around for as long as bitcoin is. How you leverage that to protect your coins is up to you, the lengths you need to go to might depend on how many people you really trust, how much btc you have etc. You get to choose how many keys there are (the limit is 16 I think) and how many are required, If you create a multi-sig wallet that is 4 of 7 for example, you can afford to lose any 3 of the keys.
You could also use other techniques such as dead man's switches or time-locked transactions (which are also natively supported). It's for sure not straightforward to have a fool proof plan, but it's also flexible, you don't need to involve solicitors at all if you don't want to for example.

I agree and in fact it sounds extremely complicated for the average person to get right and very easy to get wrong.

If I cannot easily pass an asset on to my next of kin then it fails a very basic test to me which is that it is a store of value.

In my opinion the only way I can agree that it is a store of value is if used temporarily, i.e. it is bought with FIAT and immediately used to buy something else.

 

[ant dee]

I am asking how can I pass on my bitcoins to my next of kin in any way that resembles a standard will.

Let me try a different approach.
In a standard will, the courts and the government will ensure its execution correct? Your next of kin will not get any of your assets before you die, authorities will make sure of that.
Because the authorities have control over all of our assets. In the event of a fraud or a crime they can freeze them even confiscate them.

But noone has that control over your bitcoin, for better or worse, and this is where estate planning is (depending on each ones point of view) lacking.

Until, maybe, someone very smart comes along and creates code to make bitcoin estate planning resemble a standard will.

 

[ant dee]

That is not a fair comparison. Your family home could also be hit by one of those crashes. Galway makes a good point but it is really just an example of the general consensus that currently bitcoin is a terrible store of value.

In any case, it is up to the receiver of the inheritance to accept a volatility risk or not.
Surely an arrangement can be made with the Revenue, saying that the receiver will sell the bitcoin at an exchange straight away and be taxed at the € profit he receives.

Isn't that what happens when someone states in their will for their house to be sold after their death?

 

[Leo]

What about if I am not able to? What if the marbles start to get a bit loose. What happens then? I could easily just forget my password

Then your Bitcoin join the 20+% of bitcoin already lost forever.

Until, maybe, someone very smart comes along and creates code to make bitcoin estate planning resemble a standard will.

If such a mechanism ever comes into existence, the next step will be cyber criminals exploiting it to steal bitcoin.

 

[Firefly]

Then your Bitcoin join the 20+% of bitcoin already lost forever.
If such a mechanism ever comes into existence, the next step will be cyber criminals exploiting it to steal bitcoin.

I cannot therefore see how Bitcoin can be a store of value unless used temporarily, i.e. it is bought with FIAT and immediately used to buy something else.

 

[ant dee]

If such a mechanism ever comes into existence, the next step will be cyber criminals exploiting it to steal bitcoin.

I don't understand this to be honest. The 'very smart' part would be that it won't be exploitable. Like a public wallet address with 1000btc is not exploitable now unless you know the private keys.

It will not be centralised, there will be no single point of failure to target and empty all the 'bitcoin wills'.
Code developers take all this into consideration, we are not talking about creating a centralised company called 'Coinbase Wills' that controls a big honeypot.

Cyber criminals already have centralised targets to attack and do so non stop. All that it does for the end-user is increased security.

 

[Leo]

I don't understand this to be honest. The 'very smart' part would be that it won't be exploitable. Like a public wallet address with 1000btc is not exploitable now unless you know the private keys.

It will not be centralised, there will be no single point of failure to target and empty all the 'bitcoin wills'.
Code developers take all this into consideration, we are not talking about creating a centralised company called 'Coinbase Wills' that controls a big honeypot.

Cyber criminals already have centralised targets to attack and do so non stop. All that it does for the end-user is increased security.

So what process or solution are you proposing that would allow a third party with no access to the original owner's private keys to claim or transfer ownership of another user's bitcoin? I just don't see how that couple be possible and verifiable without being wide open to exploitation.

 

[jman0war]

I agree and in fact it sounds extremely complicated for the average person to get right and very easy to get wrong.

If I cannot easily pass an asset on to my next of kin then it fails a very basic test to me which is that it is a store of value.

In my opinion the only way I can agree that it is a store of value is if used temporarily, i.e. it is bought with FIAT and immediately used to buy something else.

Put your bitcoins on a hardware wallet.
Store the password and backup phrase in a safe, or in a safe deposit box at a bank.
Keep said Safe combination, or key to the deposit box with your custodian of choice.

It would be the same for any digital ownership really.

How do you plan on transferring ownership of your cloud based email, your facebook or the www domains you own?

 

[Firefly]

How do you plan on transferring ownership of your cloud based email, your facebook or the www domains you own?

Any important emails that I need my family to have access to are copied to their own email addresses so either these are all hacked or Google is down forever (in which case I won't be alone).

The most important things in the cloud for me are those which have no financial value - family photographs & videos. For these, I back up to my PC, to my cloud provider and to 3 separate external hard drives. Belt & braces and all that!

I don't own any domains and I don't use Facebook or any other "social" media.

 

[ant dee]

So what process or solution are you proposing that would allow a third party with no access to the original owner's private keys to claim or transfer ownership of another user's bitcoin? I just don't see how that couple be possible and verifiable without being wide open to exploitation.

Well, like i said before, there is none, until someone very smart figures it out!

With the current cryptography tools you could split your keys, encrypt them further, store parts in a safe deposit box or a lawyer or whatever you want.
You can keep enough to be able to access the bitcoins yourself, and require every one of the other parts to work together to access them without you.

 

[jman0war]

It would open a major attack vector so will never occur in Bitcoin.

If one requires a cryptocurrency that offers custodial services and a centralised system including a trusted 3rd party, look elsewhere.