E330 Your Bitcoin Inheritance Plan Must be Flexible

Barring a terminal illness or physician-assisted death, it’s very hard to know when you will die. The world changes very quickly, and you do not know what the world will be like at the time of your death. For example, there were no iPhones two decades ago, and now look how technology has evolved.

So, to future-proof your plan, you must keep it as flexible as possible.

Inheritance plan vs actual circumstances

In general, your estate plan will be different from the actual circumstances upon your passing. For example:

1. Your beneficiaries and your executor may be very old or may not be alive. Or, your relationships with them may have changed.
2. Your beneficiary is wealthier than you anticipated and you may not want to leave as much money to them anymore.
3. Your assets have changed. Say you plan to give your nephew 10% of your bitcoin. But, when you pass, your bitcoin is worth way more than you ever imagined. Now that 10% is a pretty hefty chunk of change, and you didn’t intend to leave your nephew quite that much.
4. Most people do not have an estate plan at all, and even the ones who have a will or a trust don’t update them. Supposedly, 70% of plans are not up to date and 20% of them haven't been updated in 5 years or more. That’s a lot of people with ex-girlfriends still named as beneficiaries in their estate plan... But, let’s be realistic: if we didn’t do estates for a living, we’d probably forget, too!
5. No matter how much you plan for your death, there is a general chaos surrounding the probate process. You don’t know who will be alive, who will cause drama, or who will sue the estate because they are upset about how you wrote your will. People think that their heirs and beneficiaries will be cordial, but when money is involved, you never know.

Bitcoin evolves quickly

Bitcoin is a young asset, and it is still in a very fast evolutionary stage. Bitcoin has gone from your wallet being only available on your own node (if you run core software), to paper wallets where you write or print out your code/seed phrase/key, to HDD, to multisig wallets.

And that’s just wallets! Now you have second and third layers from Lightning and Arc coming on. There are more people with their own nodes now. Who knows what’s next? Will you update with each evolution? Unlikely. So, your plan needs to be able to adapt to the circumstances surrounding your death.

Even our Bitcoin podcasts have evolved over the past few years!

When to automate?

One of the main points in using Bitcoin is to eliminate trusted third-parties and middlemen. In general, automation is best suited for predictable and repeating tasks such as regular billing, social media posts, or other high volume tasks.

But there are certain circumstances where it’s not wise to use automation. Using automation is a poor choice when the task requires decision-making; it’s the opposite of predictable and repeating. You do not want to automate your estate plan. As we discussed above, you do not know what the world or your family tree will be like upon your passing.

In traditional, legacy estate plans, beneficiary designations don’t work very well. It is a form of automation to say, “Upon my death, everything will go to this person.” Avoiding legal fees and probate sounds great, but you are assuming that your plan will be up to date. You’re assuming that the amount in the bank account at the time of your death is the amount you want that beneficiary to get. More often than not, this scenario doesn’t shake out the way you hoped.

A custodial Bitcoin solution means naming a beneficiary on your Kraken or Binance account. But when automating a non-custodial Bitcoin inheritance plans (like a time-lock, letter of instruction, sharding, etc.), you have frozen in time an inflexible solution for a situation that requires great flexibility.

For probate in general, as well as Bitcoin, it is more important to rely on a human executor who can assess the situation and make the appropriate decisions. In probate, the executor may have to deal with a bureaucrat or a government employee who is asking them to do something ridiculous to get the information needed for the estate. You need a human being who can perceive that the instructions are strange and find a way to get the job done. That’s the difference from being stuck in a non-flexible system that doesn't have decision making capabilities.

In conclusion, your Bitcoin inheritance plan needs to be as flexible as possible to adapt to the evolution of Bitcoin and our ever-changing world.

To learn more about probate, check out my book, “How Probate Works,” available on Amazon. It doesn’t address Bitcoin specifically, but it can help you understand what’s involved in administering an estate. Hopefully soon, I will complete my Bitcoin inheritance book!

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