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Estate and inheritance planning is an important part of your bitcoin journey and requires foresight and planning to ensure your legacy is preserved. Too often, families focus on one component—the technical aspects of bitcoin key management—and end up overlooking the legal process by which the bitcoin will actually be distributed. Without a well-structured plan, your heirs and beneficiaries may not receive your bitcoin at the time and in the way you desire.
In this article, we’ll provide an overview of bitcoin legacy planning. We’ll cover important information to consider when designing a strategy to manage your estate, and pass your bitcoin to future generations.
Estate planning is the process of establishing how you want your assets to be managed and distributed after you’re gone. It’s not just for the wealthy or elderly—no matter your age or financial status, estate planning is your tool to help ensure that your wishes are respected, your loved ones are respected, and your assets are managed effectively.
Without a deliberate plan, your estate may be subject to state probate laws, which could result in unintended outcomes that don’t align with your wishes.
A well-rounded estate plan often includes one or more of the following:
Let’s cover these in more detail.
A will, or a last will and testament, is a legal document that describes how you would like your property and other assets to be distributed after your death.
After you’re gone, the will is usually presented to a local probate court. The person in possession of the will can do this, as well as the executor named in the will.
By submitting a “petition for probate” the executor or personal representative requests the court to legally appoint the executor. The request often includes information about the deceased person, their date of death, a list of known assets, and details about potential heirs. Once authorized, the executor assists with the probate process by helping settle any tax liabilities and passing assets to your heirs.
If you don’t have a legal will, your estate is settled according to the laws of your state of residence at the time of death. This is known as dying “intestate”, and may not result in the preferred outcome for you or your heirs. You can prevent this from happening by getting a will and periodically updating your will to reflect your wishes.
If you become unable to make decisions due to illness, injury, or age-related issues, someone must step in to manage your affairs. By drafting a power of attorney (PoA) and specifying a preferred conservator, you can help ensure that a trusted individual is considered for the role. In the event of your incapacity, a family member or close friend can present evidence in a conservatorship hearing to seek appointment. Once appointed, the conservator will have the legal authority to manage your finances and make other important decisions on your behalf.
Trusts are commonly used in estate planning, asset protection, and financial management. They are a legal arrangement involving three parties: the grantor, the trustee, and the beneficiary.
The grantor is the person who creates the trust and transfers assets into it. This person determines the trust's purpose, establishes its terms, and chooses the other parties—the trustee and beneficiaries. The grantor must decide if the trust will be revocable or irrevocable, which we’ll discuss more below.
The trustee is the person or entity that’s responsible for managing the trust's assets according to its terms and in the best interest of the beneficiaries. A trustee can be the grantor themself (while still alive), a loved one (friend or family), a professional (like a local attorney or accountant), or a corporate entity (like a bank or trust company).
The beneficiary is the person or entity who benefits from the trust's assets or income. They receive distributions from the trust as outlined in its terms. Grantors can set specific terms and conditions for beneficiaries to receive trust assets.
A revocable living trust, sometimes called a “living trust” or “revocable trust,” allows a grantor to maintain control over their assets when they’re alive. The grantor can make amendments, update trustees or beneficiaries, direct investment or revoke the trust at any point. When properly set up and funded before death, living trusts typically allow for assets to be passed quickly and without having the details of the inheritance made public.
Revocable living trusts can be thought of as a way to maintain control over your assets during your life while ensuring those assets don’t pass through probate at death. They are not replacements or alternatives to irrevocable trusts (described later), which are used for different purposes. It’s not unusual to have both revocable and irrevocable trusts.
Unlike revocable trusts, irrevocable trusts cannot be modified. When the grantor places assets into an irrevocable trust, it is a permanent transfer of possession and control of those assets. This approach is often used for asset protection and estate tax reduction.
Ensuring your legacy is preserved the way you want takes planning and often includes a combination of the tools described above. A qualified estate planning attorney can help design a strategy that works best for you and ensures your loved ones have the knowledge, skills, and resources needed to settle your estate and inherit your bitcoin.
It can be helpful for your estate planning attorney to have bitcoin knowledge, but because bitcoin is not legally unique, it’s not strictly necessary. To learn more, refer to our blog post with five key considerations when setting up a bitcoin inheritance plan.
Collaborative custody multisig is a great way to secure and protect your bitcoin within your estate and/or inheritance plans. Unchained offers several account types and configurations allowing you to:
For a deeper dive into estate and inheritance planning on a bitcoin standard, check out our webinar on advanced estate and legacy planning, first made available to our Signature clients. If you want to learn more about what Unchained offers, we invite you to book a free consultation with us today!
This article is provided for educational purposes only, and cannot be relied upon as tax or legal advice. Unchained makes no representations regarding the legal consequences of any structure described herein, and all such questions should be directed to an attorney of your choice.
