Page 18 - Southern Exposure- May '23

Page 18, Southern Exposure

elder eStAte PlAnning

Don’t Let Your Cryptocurrency Give You

And Your Loved Ones Nightmares

Submitted by Anné Desormier-Cartwright, Esq.

Although cryptocurrency access it. Depending on how much he owned at the time of his is at your own risk, as it expresses no opinion by the firm on
may be one of the latest death, this could be a nice sum of money for his loved ones; your specific circumstances or legal needs. An attorney client
investment strategies with but because Moody did not share this information with his relationship is not created through the information provided
great potential, for some family and, like most 20-somethings, did not have an estate herein.
individuals and their plan, it will remain a mystery to his family. To comply with the U.S. Treasury regulations, we must
loved ones, investing While it may be easy for your loved ones to determine inform you that (i) any U.S. federal tax advice contained in
in cryptocurrency has most of what you own at the time of your death by going this newsletter was not intended or written to be used, and
not gone as planned. The through your mail, searching your computer, or looking cannot be used, by any person for the purpose of avoiding
following stories are each through your residence, cryptocurrency can be a lot harder U.S. federal tax penalties that may be imposed on such person
a little different, but they to find. Depending on the type of wallet you use, it may not and (ii) each taxpayer should seek advice from their tax
all underline one simple be obvious to your loved ones that you own something of advisor based on the taxpayer’s particular circumstances.
warning: If you own potentially high value. This is why it is important that you 1 Grace Ferguson, How a cryptocurrency fortune crippled
cryptocurrency, you need a plan. have a plan for your cryptocurrency. A trusted person needs a deceased billionaire’s estate, The Daily Dot (Dec. 23,
Impact Of Volatility On Estate Administration to know that you own cryptocurrency, the type you own, 2021), https://www.dailydot.com/debug/death-internet-
Matthew Mellon, an investor and businessperson who how it is stored, how to access it when necessary, and what cryptocurrency-matthew-mellon/.
was a member of two prominent families, the Mellons and your wishes are for it after your death. Failing to address this 2 This man owns $321M in bitcoin — but he can’t access
the Drexels, died in April 2018. At the time of his death, his planning will leave your family without a clue as to what you it because he lost his password, CBC Radio-Canada
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estate was estimated to be worth approximately $200 million. truly owned at your death. (Jan. 15, 2021), https://www.cbc.ca/radio/asithappens/
Much of his wealth came from a $2 million investment in the Cryptocurrency is an amazing advancement for secure as-it-happens-friday-edition-1.5875363/this-man-owns-
cryptocurrency XRP, managed by the company Ripple. and private transactions. This groundbreaking investment 321m-in-bitcoin-but-he-can-t-access-it-because-he-lost-his-
Mellon died with an outdated will that did not mention strategy has the potential to forever change how we view password-1.5875366.
his cryptocurrency. It was later discovered that he kept the money and financial transactions. Because it is so new, finding 3 Steve Marshall, The latest gamble to recover man’s lost
keys to his cryptocurrency on various devices throughout and managing cryptocurrency may present some barriers. To Bitcoin fortune, A Current Affair, 9 Now, https://9now.nine.
the country and under other people’s names. Fortunately, his best protect yourself and your loved ones, we encourage you com.au/a-current-affair/bitcoin-software-developer-stefan-
lawyers were able to access his cryptocurrency by working to speak with a trusted advisor to craft your cryptocurrency thomas-fortune-rising-forgotten-millions/1e0f32bb-62ed-
with Ripple. However, it is extremely rare for anyone to be plan. 464c-8ac1-63716779bdfe (last visited Dec. 2, 2022).
able to access cryptocurrency without a plan. Call our office today at (561) 694-7827, Elder & Estate 4 Bitcoin Price, CoinDesk, https://www.coindesk.com/price/
Because the value of the XRP fluctuated by approximately Planning Attorneys PA, 480 Maplewood Drive, Suite 3, bitcoin/ (last visited Nov. 23, 2022).
30 percent in the weeks after Mellon’s death, it was crucial Jupiter, FL 33458. 5 Bloomberg News, Legislation is needed to help heirs
that the XRP be liquidated quickly to pay his outstanding The content of this article is general and should not be access bitcoin accounts, Investment News (Feb. 18, 2022),
debts, income tax obligations, and estate tax. However, relied upon without review of your specific circumstances by https://www.investmentnews.com/legislation-is-needed-to-
Mellon had entered into an agreement with Ripple that limited competent legal counsel. Reliance on the information herein help-heirs-access-bitcoin-accounts-73449.
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. To
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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 10 attempts to enter the password before it is encrypted
forever. As of January 2021, he had only two attempts
remaining. Although the value of Bitcoin has dropped
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significantly, his Bitcoin is still worth well over $100 million
dollars. Unfortunately, unless he remembers his password
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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 26 in a plane crash. At the time of his
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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