An acquaintance of ours from church has been talking non-stop about how much money he made off “Bitcoin”. I have no idea what that is, nor does my wife, but we nodded politely and said we were very happy for him. A couple of days later, I saw on the news a star athlete wanted to get paid in “Bitcoin”. Now I am curious,
What the heck is Bitcoin?
So, I do a little digging and find out it is a “cryptocurrency”, which basically means it is just data, similar to the software you buy to do your taxes. It has been referred to as “digital money”. But, it does have value and there is only a certain amount of it available. It is not limitless. You can “mine” it or buy it. If you own it, you can sell it. You can actually buy EFTs (exchange-traded funds) and mutual funds of cryptocurrency. But, you can’t see it, can’t hold it, and can’t put a title on it. Even so, it does appear some people invest in it, just as they would buy gold. As a “hedge”, it’s something to diversify risk in an investment portfolio. To make it more confusing, there is not only Bitcoin, but also Dogecoin, Zcash, Litecoin, Ethereum, and…I’m starting to get a headache there are so many.How do you identify the owner?
Learning about cryptocurrency has caused me to consider buying some. But, my wife posed a good question, “If you can’t hold, can’t title it, and can’t see it, how does anyone know you own it?” I don’t fully understand it, but there is a “ledger”, basically a collection of data that is encrypted. This is actually referred to as a “blockchain” and it is held in a “digital wallet”, which actually provides a significant degree of protection as it cannot be stolen or used by other persons. Unless you have the password to your digital wallet, it actually is protected by the blockchain. After understanding all that, my wife then asked, “Can we name a beneficiary on it if we die?” It was rhetorical as we both know that probably was not possible, which inevitably led to the next question,“What happens to it when we die?” How do our kids get it?
Now that was a great question. So, I called our attorney who did our living trust. He said basically it is very easy to take care of. Simply, we can do a new assignment including the assigning of our cryptocurrency. However, we have to be diligent with maintaining our cryptocurrency records. He warned us that if we lose our digital wallet, such as if it is on a flash drive, or if you lose your password, then there is nothing you can do. It is lost forever. Thus, it is very important our kids know where the digital wallet is, and that they know where the password is located to get into it. I now feel competent enough to talk to our financial advisor about whether cryptocurrency is right for us, and if we chose to buy some, what we need to do to make sure it gets to our kids when we pass.Learn How to Obtain A Living Trust
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This area of the website is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of the author, not of the National Association of Family Services, and have not been evaluated by the National Association of Family Services for accuracy, completeness, or changes in the law.
