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Cryptocurrency owners should consider storing the codes in a secure, but accessible, location or perhaps multiple locations, Taylor and his team advised. While it is generally not recommended that an individual share her passcode with others for security reasons, the reality is that once a passcode is lost it is virtually impossible to recover. “If the executor doesn’t know where the keys or passcodes for assets held in a self-hosted wallet are stored, and the decedent hasn’t left instructions, those funds are gone,” Goldman said. That could mean the digital assets become permanently inaccessible with no hope of recovery. Zachary Goldman, a partner at Wilmer Cutler Pickering Hale and Dorr LLP, whose practice focuses largely on fintech, cryptocurrency and distributed ledger technology, notes that these cryptocurrency codes, also called keys, can be lost.
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Those passcodes mean the relative ease of conveyance in estate transactions comes with a downside. For example, an individual holding Bitcoin stores it in a digital wallet that can only be accessed by the use of a secret 64-digit private key. He and associates at Hughes Hubbard tackled the issue in the American Bar Association’s Probate & Property magazine.Ī complex, multicharacter passcode from the deceased is needed to access and distribute the estate’s cryptocurrency assets, which are only available in digital form, to the named beneficiaries. Unlike a traditional bank, which typically requires executors to produce an original death certificate and other documents to take control of accounts in the deceased owner’s estate, cryptocurrency only requires the fiduciary to have the deceased’s "passcode" for access, Taylor said.
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One of the big advantages of using cryptocurrencies in estate planning is the ease of transference, attorneys say.
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“It is going to be necessary for every estate attorney and planner to learn about these assets and how to advise clients on how to create the best estate plans for clients holding cryptocurrency and properly administer the estates of deceased clients who owned cryptocurrency at their death.” Taylor, head of the private client services group at Hughes Hubbard & Reed LLP in New York. “These are becoming key holdings,” said Parker F. The rapid rise in circulation and growing popularity of cryptocurrencies is prompting attorneys and estate planners to adjust as digital assets are inherited through wills, trusts and estates, according to experts who warn of the danger of lost or misappropriated assets.
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