Blockchain technology is a shared, decentralized ledger system that records certain transactions and assets. It’s typically used to store information about cryptocurrency, like Bitcoin. It consists of virtual “blocks”, which contain information about who owns a certain amount of crypto. These blocks are connected by hashes (the hash at the end of one block connects with the hash at the beginning of the next block). In this way, they form a “chain” of information that cannot be easily removed or altered.
As more and more people acquire assets that are represented using blockchain, estate planning has had to evolve to accommodate both the assets and the technology. As with any new technology, the laws regarding blockchain are lagging behind its use. That means that estate planning is especially important in cases where a substantial amount is held on a blockchain.
Estate Planning Difficulties With Blockchain
Having assets raises specific problems in regards to estate planning. Unlike other assets, which can be easily discovered and are often accessible with a death certificate, no such safeguards exist on the blockchain. Some other issues that complicate estate planning include:
- Heirs are unaware that assets exist (that is, they do not even know to look for them).
- Heirs know that the assets exist, but do not know where they’re held (are they on an exchange? In a wallet?)
- Heirs know the above information, but do not know the appropriate passcodes to access them (or do not know where the passcodes are securely stored).
Estate planning is vital for anyone who holds sizeable assets that they want to pass on to their heirs. However, in the case of blockchain assets, it’s of paramount importance that thorough estate planning, with an advisor knowledgeable about blockchain, be performed as soon as possible in order to ensure the transferability of wealth.