Gabriel Katzner - March 14, 2023 - Asset Protection
different crypto coins placed on top of a mobile phone with crypto app open saved with password, don't make the mistake of not having and estate plan

Cryptocurrency is an amazing advancement that allows for secure and private transactions. However, extreme security and privacy can backfire if you lose the ability to access your cryptocurrency or never tell anyone how to access it upon death.

Because cryptocurrency is so new, your estate plan may not include information about your cryptocurrency investments, which could lead to a significant loss for your loved ones. They may never know that you had a potentially high-value investment that could have significantly impacted their future.

Cryptocurrency is volatile

Matthew Mellon was a member of the Mellon and Drexel banking families. Matthew, a successful investor, and businessperson, died in 2018, leaving an estate valued at approximately $200 million. Much of his wealth resulted from a $2 million investment in the cryptocurrency XRP, which was managed by Ripple, a company for which he became a global ambassador. Matthew received much of his compensation for his work in XRP currency.

Unfortunately, Matthew had an outdated will, two ex-wives, and three young children, and $193 million of his wealth was inaccessible in XRP. The value of XRP fluctuated by as much as 30% in the weeks after his death. His lawyers scrambled to liquidate his XRP investments to pay off his significant debt. Luckily, his lawyers could access XRP by approaching Ripple, the company that manages the cryptocurrency. This was fortuitous since most cryptocurrencies are not tied to a central entity.

Matthew’s family was lucky because his lawyers were able to gain access to XRP, but an agreement Matthew made with Ripple stated that he could only sell a small portion of XRP each day. This delayed wrapping up his affairs and cost his estate about half its value. Unfortunately, by the end of 2019, XRP had lost two-thirds of its value.

The estate settled all its debts in 2021, almost three years after Matthew died. Had Matthew been upfront with his trusted decision-makers and advisers about his investments and their values, they might have been able to craft an estate plan that would be able to pay off his financial obligations without relying on his investment in XRP. This might have made it easier for his fiduciaries to gain access to his cryptocurrency and start the sell-off when it had a higher value.

No Password, No Access

Stefan Thomas is a software developer and an early adopter of bitcoin. As payment for a 2011 video that shows how bitcoin works, he was awarded 7,002 Bitcoins from a Bitcoin enthusiast. Stefan used a USB hard drive known as IronKey to hold his digital wallet. IronKey allows only ten attempts to enter the password before it becomes encrypted forever, and Stefan forgot his password. Stefan’s 7,002 Bitcoin had skyrocketed in value to about $220 million. As of January 2021, he only had two password attempts left.

Stefan’s Bitcoin dropped slightly in value. As of November 2022, it was still worth well over $100 million. Unless he remembers his password or finds a way to bypass the security on his hard drive, this money is gone forever.

Passwords to accounts and online profiles can be included in your estate plan. You can stipulate when and who has access to this information. Hindsight is 20/20. Make a plan for your passwords before you have a fortune just out of reach, as Stefan did.


Cryptocurrency secrets die with you


In 2013, Matthew Moody, a bitcoin miner, died tragically in an observational flight. His father spent three years trying to find his Bitcoin and determine their value. Because Bitcoin is decentralized and unregulated, without access to Matthew’s digital wallet keys, it is almost impossible for his father to find out information about his Bitcoin.

Because Matthew did not share information with his family about his Bitcoin or have an estate plan in which he shared this information with his trusted advisor, his loved ones will not be able to benefit from his Bitcoin Mining skills.

Before cryptocurrency, most families had a reasonable idea of what their loved ones owned, or they could gather enough clues to piece it together. Depending on how you store your digital keys, it may be impossible for your family to know that you have high-value cryptocurrency accounts.

Develop a plan for sharing this information with a trusted person. They need to know that you own cryptocurrency, how it is stored, and how to access it when necessary. They also need to know what your wishes are for it upon your death. Failing to plan in advance can leave your loved ones without an inheritance you may have wanted them to have.

Speak to a trusted advisor to help you develop your cryptocurrency plan, contact us and schedule a call with us at 855.631.3457 to learn more about how to protect those most important to you.





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