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Estate planning issues with Cryptocurrencies

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  • Feb 14th, 2021 2:11 pm
[OP]
Deal Fanatic
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Sep 1, 2013
5863 posts
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Estate planning issues with Cryptocurrencies

As many of you in this forum are already aware, I have no intention to own Crypto myself, but I find the current mania in Crypto very interesting to follow. While I was working today, I came across the following article from an accounting firm which brings up some interesting estate planning issues re: Crypto:

https://www.richter.ca/bequeathing-bitc ... -properly/

My take on this:

- I understand that some people prefer Crypto due to its anonymity. But probated wills are public documents - would someone who wants to keep their assets secret by holding Crypto be comfortable in mentioning it in their will?

- The issue of passwords for Crypto is very interesting! Again, some people prefer Crypto due to its anonymity, but we are all mortal and you never know when your time is up. You could memorize the password to your Crypto in order to keep your Crypto safe from others, but dead men tell no tales - if you pass away and have not provided the means for your loved ones who survive you to know the password to your Crypto, you have kind of screwed them out of part of their inheritance.

- As some of you may know, when you pass away in Canada, you are deemed to have sold all of your assets at their fair market value at the time of your death. Unless you have a spouse to inherit your Crypto, your estate could face a substantial tax bill on the Crypto you owned. And if you can't show some kind of proof to the CRA how much you paid for the Crypto (i.e the ACB - adjusted cost base), the CRA could assume that the ACB is nil, so the capital gain would be the entire fair market value.

Anyways, I am just bringing this up because I am curious - is there anyone in the forum who owns Crypto and has considered these issues? If so, how are you handling them? I am particularly interested to know how you would handle the issue of passwords - on the one hand, you don't want anyone to steal your Crypto while you are alive, so you just memorize the password; on the other hand, you don't want your loved one to lose out on their inheritance because you were too paranoid to write your password down and store it somewhere.
11 replies
Deal Addict
User avatar
Aug 3, 2009
1991 posts
447 upvotes
Nova Scotia
I think the third point is the most problematic. Unless family has access to your online accounts where all the receipts and transactions are stored or you have diligently saved and made accessible to heirs this information, CRA will not be happy. I have already found it tedious to keep this information. Some exchanges like Newton do not provide 'receipts', just an excel spreadsheet log of transaction.

I see a real role for lawyers here. They store wills at the firm and carry out some very detailed instructions. Although people are hesitant to trust anyone, lawyers may be the medium to take the instructions and access details for safe keeping until probate.
Deal Fanatic
Apr 5, 2013
5428 posts
2542 upvotes
hollywood pk
CheapScotch wrote: As many of you in this forum are already aware, I have no intention to own Crypto myself, but I find the current mania in Crypto very interesting to follow. While I was working today, I came across the following article from an accounting firm which brings up some interesting estate planning issues re: Crypto:

https://www.richter.ca/bequeathing-bitc ... -properly/

My take on this:

- I understand that some people prefer Crypto due to its anonymity. But probated wills are public documents - would someone who wants to keep their assets secret by holding Crypto be comfortable in mentioning it in their will?

- The issue of passwords for Crypto is very interesting! Again, some people prefer Crypto due to its anonymity, but we are all mortal and you never know when your time is up. You could memorize the password to your Crypto in order to keep your Crypto safe from others, but dead men tell no tales - if you pass away and have not provided the means for your loved ones who survive you to know the password to your Crypto, you have kind of screwed them out of part of their inheritance.

- As some of you may know, when you pass away in Canada, you are deemed to have sold all of your assets at their fair market value at the time of your death. Unless you have a spouse to inherit your Crypto, your estate could face a substantial tax bill on the Crypto you owned. And if you can't show some kind of proof to the CRA how much you paid for the Crypto (i.e the ACB - adjusted cost base), the CRA could assume that the ACB is nil, so the capital gain would be the entire fair market value.

Anyways, I am just bringing this up because I am curious - is there anyone in the forum who owns Crypto and has considered these issues? If so, how are you handling them? I am particularly interested to know how you would handle the issue of passwords - on the one hand, you don't want anyone to steal your Crypto while you are alive, so you just memorize the password; on the other hand, you don't want your loved one to lose out on their inheritance because you were too paranoid to write your password down and store it somewhere.
I actually just did this..my benefit is, my new lawyer is one of my kids life long friends ( so I can trust her)...my passwords are with her..not in my will. my crypto daughter will know what to do with them, and they aren't in proper order so only my kids know...but, I will treat it as jewelry or gold, possession in hand....is jewelry and gold passed down taxable?
Deal Addict
Sep 2, 2009
1446 posts
1115 upvotes
Ottawa
cardguy wrote: I actually just did this..my benefit is, my new lawyer is one of my kids life long friends ( so I can trust her)...my passwords are with her..not in my will. my crypto daughter will know what to do with them, and they aren't in proper order so only my kids know...but, I will treat it as jewelry or gold, possession in hand....is jewelry and gold passed down taxable?
Technically, yes
Deal Fanatic
Apr 5, 2013
5428 posts
2542 upvotes
hollywood pk
cloak wrote: Technically, yes
i guess its will be gifted and joint custody then :)
Deal Fanatic
Oct 7, 2010
9662 posts
1694 upvotes
It's a non issue. Give away crypto device and password before dying. It's like giving away cash in a box to love ones. Same thing.
[OP]
Deal Fanatic
User avatar
Sep 1, 2013
5863 posts
684 upvotes
spike1128 wrote: It's a non issue. Give away crypto device and password before dying. It's like giving away cash in a box to love ones. Same thing.
Its more like keeping cash in a box and hiding it somewhere where nobody can find it.

The problem with your suggestion is that sometimes, God forbid, people die unexpectedly, like in an accident or something. More commonly, elderly people will suffer dementia in their final years and not be able to recall passwords. Or they will be too paranoid (due to dementia) to tell anyone their password.
Deal Fanatic
Apr 5, 2013
5428 posts
2542 upvotes
hollywood pk
CheapScotch wrote: Its more like keeping cash in a box and hiding it somewhere where nobody can find it.

The problem with your suggestion is that sometimes, God forbid, people die unexpectedly, like in an accident or something. More commonly, elderly people will suffer dementia in their final years and not be able to recall passwords. Or they will be too paranoid (due to dementia) to tell anyone their password.
...and thats why I did what I did..before I lose my mind
Member
Feb 21, 2017
304 posts
194 upvotes
CheapScotch wrote: As many of you in this forum are already aware, I have no intention to own Crypto myself, but I find the current mania in Crypto very interesting to follow. While I was working today, I came across the following article from an accounting firm which brings up some interesting estate planning issues re: Crypto:

https://www.richter.ca/bequeathing-bitc ... -properly/

My take on this:

- I understand that some people prefer Crypto due to its anonymity. But probated wills are public documents - would someone who wants to keep their assets secret by holding Crypto be comfortable in mentioning it in their will?

- The issue of passwords for Crypto is very interesting! Again, some people prefer Crypto due to its anonymity, but we are all mortal and you never know when your time is up. You could memorize the password to your Crypto in order to keep your Crypto safe from others, but dead men tell no tales - if you pass away and have not provided the means for your loved ones who survive you to know the password to your Crypto, you have kind of screwed them out of part of their inheritance.

- As some of you may know, when you pass away in Canada, you are deemed to have sold all of your assets at their fair market value at the time of your death. Unless you have a spouse to inherit your Crypto, your estate could face a substantial tax bill on the Crypto you owned. And if you can't show some kind of proof to the CRA how much you paid for the Crypto (i.e the ACB - adjusted cost base), the CRA could assume that the ACB is nil, so the capital gain would be the entire fair market value.

Anyways, I am just bringing this up because I am curious - is there anyone in the forum who owns Crypto and has considered these issues? If so, how are you handling them? I am particularly interested to know how you would handle the issue of passwords - on the one hand, you don't want anyone to steal your Crypto while you are alive, so you just memorize the password; on the other hand, you don't want your loved one to lose out on their inheritance because you were too paranoid to write your password down and store it somewhere.
Few solutions to this

1. Most common one is setting up a multi sig wallet. You create 3, 5, or 7 or etc passwords. In order for the funds to be unlocked 2/3 or 3/5 or 5/7 passwords must be signed. You keep one, your wife gets one, your kid or kids get one. You die, they can still recover funds when the band their passwords together

2. You can tell loved ones where your 1 seed(password) is stored. Like hiding cash. You die they use that pass to spend funds

3. Use a service like this Final Message

Or this

Vault
Deal Addict
Jan 17, 2009
2983 posts
2902 upvotes
Toronto, Ontario
Everyone has a responsibility to their family to plan their estate, most don't like to think about dying so do nothing.

Holding crypto is no different than having cash hidden in your house.. If you don't tell anyone you have it and where to find it when you die, how is that the cash's fault?
Deal Fanatic
Oct 7, 2010
9662 posts
1694 upvotes
Ecsta wrote: Everyone has a responsibility to their family to plan their estate, most don't like to think about dying so do nothing.

Holding crypto is no different than having cash hidden in your house.. If you don't tell anyone you have it and where to find it when you die, how is that the cash's fault?
I sometimes love how people are so good at hustling money but has no idea how their lives ends up or what awaits them.

Why would anyone ask about estate questions if you dont have a huge holding. There are lawyers for this as well. This is why I spend lots of time to teach my children to manage money. So I have no worry they swindle my money. I just gifted to them way earlier than I die.

I find some really rich people has no real idea how to deal with succession plans and somehow they think they are immortal. There are some canadian moguls who actually has no idea and dies way before they are due.
Newbie
Jan 23, 2017
49 posts
16 upvotes
etobicoke
The current generation of people making money in stocks/residential/crypto - tend to be first generation 'money'...
A lot of the financial planning knowledge is built into a family through generations.

People think its all about making money today, whereas its just as important to be able to risk manage the money earned (as well as understand how taxes work).
thats the difference between generational money, and first gen money.

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