In mid-2021, the news shook the financial world, especially that of decentralized finance. Mircea Popescuone of the largest holders of bitcoin in the world, had died at the age of 41 while swimming on a beach in Costa Rica. The huge wave that took the Romanian tycoon’s life, according to the New York Post, brought with it also the keys that were probably kept in a corner of his memory to gain access to his fortune. cryptocurrencies, about $ 2 billion that could be lost forever.
A similar case could have happened with the digital domain John McAfeethe pioneer of antivirus software who was found dead in his cell around the same time Popescu was swallowed by the sea.
We are facing a problem that is becoming more and more common, as we know Crypto assets, including bitcoin, are decentralized, which means there is no central body to manage and dispose of them after death.
One account is the nature of the asset and another is its custody, which can be a centralized exchange over which states have jurisdiction and can then arrange for the asset to be transferred to the heirs, as with any other type of ownership in the case. is . This does not happen when we store our assets in a decentralized wallet that we access only with our private key or when we use cold storage devices.
The latter challenges estate planning because, in the event of an inheritance request, the heirs will not be able to go to a judge to order the transfer and / or registration of such assets in the name of the heir, as they could do with money in a bank account, goods or other traditional assets .
Although the spectacularity and morbidity of the people surrounded are not and will not be the norm, cases like that of Popescu and McAfee have brought back to the agenda an issue that was unthinkable until recently or confined to the realm of science fiction: After we die, what happens to our website and platform passwords, document and image files, or, in an even more recent case, our cryptocurrency holdings? How can we make sure they work like other products or do what we want?
All ownership is legally inherited equally. When the person dies, his estate automatically passes to his heirs. The main problem here is that digital assets differ significantly from class to class (NFT, stablecoin, token, etc.) and therefore require a tailor-made solution. As these activities are decentralized in nature, The most important thing is to plan the storage. It will not be the same for both the owner himself and a central exchange.
The technological component of the succession of digital assets contradictorily presents an ease that does not solve the problem. Obviously, an easy way to technically solve this problem is that I ask the desired person to write my passwords in advance and that person can log in and have the wallet where I have my cryptocurrencies, for example, but this could be in some non – legal countries, in which powers of attorney granted in the course of life become void upon the death of someone. This alternative, on the other hand, would not be feasible if the assets were on the stock exchange, as they require a double or even triple authentication factor and could also lead to the suspension of the account in case of failure to log in. Thereby, The right thing to do would be to make a will and appoint an agent or executor so they can walk past Coinbase, for example, and work to fulfill my will from there. Another alternative would be to structure a trust, the trustee being the one who appears in front of the stock exchanges, for example.
Digital inheritance is starting to become part of the laws in some US states, such as Wisconsin, Connecticut, and Rhode Island, and even Florida has a law. In Europe, the Swiss government is also studying possible legislation through a joint project with the University of Basel and there are first advances in the field of digital asset inheritance in the EU with Spain and France in practice. In Latin America, where executors do not represent 5% of the total population, there are no regulations on these issues.
In the absence of specific regulations, it is therefore very important to determine the fate of these assets, possibly in the same document that determines the fate of the others.
There are two recommended alternatives to solve this problem: one of them is Use some of the traditional estate planning tools like wills, partnerships, and trusts. The other more technological option would be the use of smart contracts or smart contracts, which are self-executing lines of code that work with an immutable structure because they are distributed on a blockchain network and guarantee their execution by checking that the condition is satisfied. which guarantees its execution if a certain condition is satisfied.
They could be of great help in arranging the post mortem disposal of our crypto assets. We could develop a smart contract that has a similar structure to my death, my assets from the X-wallet are sent to that other X-wallet (those of the heirs), or the keys are sent to the email of the heirs. There are several ways to structure the smart contract and verify the death of the crypto-asset holder and that’s where good advice comes in.
The issue of digital assets raises a universe of questions that previous generations have not faced and that can increase in value over time. According to a recent Goldman Sachs survey, around 15% of family offices around the world already have exposure to cryptocurrencies in some way. And just over half of the families Goldman surveyed this year (2021) said they want to invest in cryptocurrencies in the future.
* Martn Litwak is an attorney specializing in wealth structuring and conservation, mutual fund investing, international taxation and wealth technology. He is also the founder and CEO of Untitled SLC and Smart Structuring.