Don’t Let Your Cryptocurrency Give You and Your Loved Ones Nightmares

Cari Rincker Estate Planning Leave a Comment

Although cryptocurrency may be one of the latest investment strategies with great potential, for some individuals and their loved ones, investing in cryptocurrency has not gone as planned. The following stories are each a little different, but they all underline one simple warning: if you own cryptocurrency, you need a plan.

Impact of Volatility on Estate Administration

Matthew Mellon, an investor and businessperson who was a member of two prominent families, the Mellons and the Drexels, died in April 2018.[1] At the time of his death, his estate was estimated to be worth approximately $200 million. Much of his wealth came from a $2 million investment in the cryptocurrency XRP, managed by the company Ripple.

Mellon died with an outdated will that did not mention his cryptocurrency. It was later discovered that he kept the keys to his cryptocurrency on various devices throughout the country and under other people’s names. Fortunately, his lawyers were able to access his cryptocurrency by working with Ripple. However, it is extremely rare for anyone to be able to access cryptocurrency without a plan.

Because the value of the XRP fluctuated by approximately 30 percent in the weeks after Mellon’s death, it was crucial that the XRP be liquidated quickly to pay his outstanding debts, income tax obligations, and estate tax. However, Mellon had entered into an agreement with Ripple that limited the amount of XRP that could be sold at a given time. This delayed the wrapping up of his affairs. By the end of 2019, his estate was worth less than half of the original value at his time of death because the XRP had lost about two-thirds of its value.

Had Mellon been up front with his trusted decision makers and advisors, they might have been able to craft a plan that provided his estate with the necessary funds to pay his outstanding obligations without having to rely primarily on the XRP. Additionally, if his plan had made it easier for his fiduciaries to gain access to the cryptocurrency, they might have been able to start the sell-off sooner, when the value was higher.

Forgetting Your Password Can Be Expensive

Stefan Thomas, a software developer, was an early adopter of Bitcoin. In fact, he created a video in 2011 about how digital currency works and was awarded 7,002 Bitcoins.[2] To store his Bitcoins, Thomas used a USB hard drive known as an IronKey that contained his digital wallet. Later that same year, he lost the password to his IronKey. IronKey allows only ten attempts to enter the password before it is encrypted forever. As of January 2021, he had only two attempts remaining.[3] Although the value of Bitcoin has dropped significantly, his Bitcoin is still worth well over $100 million dollars.[4] Unfortunately, unless he remembers his password or is somehow able to get around it, he will never see that money.

This should serve as an important lesson for all of us. Items that require a password do so for a reason. However, we cannot always assume that we will remember it or that someone else will be able to retrieve it for us. You must have a system in place to make sure that you or your trusted decision makers can access your passwords when necessary.

Dead and Gone

Matthew Moody, a miner of Bitcoin, tragically passed away at the age of twenty-six in a plane crash.[5] At the time of his death, he owned Bitcoin that he mined. However, no one, not even his parents, knows how to go about finding it. No one knows how much he owned, where it was stored, or how to access it. Depending on how much he owned at the time of his death, this could be a nice sum of money for his loved ones; but because Moody did not share this information with his family and, like most twenty-somethings, did not have an estate plan, it will remain a mystery to his family.

While it may be easy for your loved ones to determine most of what you own at the time of your death by going through your mail, searching your computer, or looking through your residence, cryptocurrency can be a lot harder to find. Depending on the type of wallet you use, it may not be obvious to your loved ones that you own something of potentially high value. This is why it is important that you have a plan for your cryptocurrency. A trusted person needs to know that you own cryptocurrency, the type you own, how it is stored, how to access it when necessary, and what your wishes are for it after your death. Failing to address this planning will leave your family without a clue as to what you truly owned at your death.

Cryptocurrency is an amazing advancement for secure and private transactions. This groundbreaking investment strategy has the potential to forever change how we view money and financial transactions. Because it is so new, finding and managing cryptocurrency may present some barriers. To best protect yourself and your loved ones, we encourage you to speak with a trusted advisor to craft your cryptocurrency plan.

[1] Grace Ferguson, How a cryptocurrency fortune crippled a deceased billionaire’s estate, The Daily Dot (Dec. 23, 2021), https://www.dailydot.com/debug/death-internet-cryptocurrency-matthew-mellon/.

[2] This man owns $321M in bitcoin — but he can’t access it because he lost his password, CBC Radio-Canada (Jan. 15, 2021),

https://www.cbc.ca/radio/asithappens/as-it-happens-friday-edition-1.5875363/this-man-owns-321m-in-bitcoin-but-he-can-t-access-it-because-he-lost-his-password-1.5875366.

[3] Steve Marshall, The latest gamble to recover man’s lost Bitcoin fortune, A Current Affair, 9 Now, https://9now.nine.com.au/a-current-affair/bitcoin-software-developer-stefan-thomas-fortune-rising-forgotten-millions/1e0f32bb-62ed-464c-8ac1-63716779bdfe (last visited Dec. 2, 2022).

[4] Bitcoin Price, CoinDesk, https://www.coindesk.com/price/bitcoin/ (last visited Nov. 23, 2022).

[5] Bloomberg News, Legislation is needed to help heirs access bitcoin accounts, Investment News (Feb. 18, 2022), https://www.investmentnews.com/legislation-is-needed-to-help-heirs-access-bitcoin-accounts-73449.

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