E335 Why a Letter of Instruction for Bitcoin Inheritance Will Fail
Release Date: 09/13/2023
E342 Thank You to Our Listeners!
Anthony S. Park
Based on feedback from you, the audience, we're pausing these episodes and will focus on writing instead: Our blog: Our books on Reviews always appreciated! Thank you for sharing all your amazing questions and stories, and thank you for listening!
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E341 How Long to Transfer Real Estate After Death
Anthony S. Park
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E340 Reasons Not to Make a Loved One the Executor
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E339 Why Sharing Your Seed Phrase is a Bad Bitcoin Inheritance Plan
Anthony S. Park
In this episode, we will talk about self-custodied bitcoiners (not those who have their coin on an exchange or with a third party). Some bitcoiners share their seed phrase with their spouse or adult children. Or perhaps they share their cloned wallet with those trusted individuals. It’s temptingly easy, essentially . But, as we’ll discuss, it can be insecure for reasons you may not think of. Sharing your seed phrase can be dangerously . Relationships change One reason that this plan is not flexible is because relationships change. Married couples can become divorced or...
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E338 Should I Sell My Home Before I Die?
Anthony S. Park
This is a very common question that we get from Solo Agers. We’ll review the pros and cons of making that decision. Reasons to sell your home before you die The biggest reason Solo Agers want to sell their home before they die is because they don’t want to leave a mess for their loved ones. Otherwise, there may be a lot of cleaning, maintenance, and packing for the heirs to do. Additionally, the before it is in sellable condition. Another reason is that Solo Agers may want to downsize anyway. Downsizing is a different topic, so we won’t focus on that here. Reasons to...
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E337 Who Owns a House During Probate?
Anthony S. Park
When someone dies, many folks are confused about who owns the house during probate, right after the death. Technically, the heirs own it immediately upon death, subject to debts and taxes of the estate. But, sometimes is not clear who the heirs are. The probate process decides who exactly are the heirs and places an executor in charge to sort out all those debts and taxes. So, the heirs own the house, but if it is not clear who the heirs are, then you kind of need to wait to see who really owns it. Understandably, this is a bit confusing. We’ll cover common questions on who owns the property...
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E336 Risks of Being an Executor
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What are the risks of being an executor? An executor has a lot of power and responsibility during probate, but is correspondingly accountable for everything that happens within the estate. We’ll cover how an executor has risk of even personal liability, how long that risk lasts, and how an executor can protect himself from these risks. Executor personally liable for debts and taxes The executor has personal liability for debts, taxes, and anything wrong with the estate. If an executor makes an error, the court’s first reaction is to deny payment of the executor's commission. If the...
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E335 Why a Letter of Instruction for Bitcoin Inheritance Will Fail
Anthony S. Park
A letter of instruction will likely fail for your bitcoin inheritance plan and should have only a marginal role in your plan, if any. Search for “bitcoin inheritance” and you will probably find lots of people advising you to write a letter of instruction for your heirs. We talked about this and even provided a . Now, having spent a bit more time delving into different approaches to bitcoin inheritance, we’re de-emphasizing a letter of instruction. Note: this applies to self-custodied bitcoin, not held through a third-party. Educate your heirs A letter of instruction is a subcategory the...
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E334 Why Hire a Professional Trustee?
Anthony S. Park
I do serve as a professional trustee, not just executor, or our Solo Ager clients. We’ll cover why our Solo Ager clients are looking for a professional trustee, why they don’t use banks, and how much it costs to hire a professional trustee. Disputes between trustee and beneficiary Why are our Solo Ager clients looking for a professional trustee? The main reason is because of potential disputes between the trustee and the beneficiaries. Unfortunately, this kind of conflict is very common, even more so than between heirs and executors. A trust creates a much longer relationship: an estate...
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E333 Seller Credit When Selling Probate Real Estate
Anthony S. Park
This happens when the buyer agrees to a higher contract price, but the seller also agrees to credit back a set amount to the buyer, so the net purchase price is lower. For example, if the buyer wants the house for $250,000, they would set the contract price at $300,000 with a side agreement that the seller would credit $50,000 on the closing statement, effectively making the price $250,000. Why not just a price reduction? Co-ops (and sometimes condos and homeowners’ associations) want the closing price to be (artificially) higher to maintain their average price per square foot. They don’t...
info_outlineA letter of instruction will likely fail for your bitcoin inheritance plan and should have only a marginal role in your plan, if any.
Search for “bitcoin inheritance” and you will probably find lots of people advising you to write a letter of instruction for your heirs. We talked about this and even provided a sample letter of instruction. Now, having spent a bit more time delving into different approaches to bitcoin inheritance, we’re de-emphasizing a letter of instruction.
Note: this applies to self-custodied bitcoin, not held through a third-party.
Educate your heirs
A letter of instruction is a subcategory the general approach: I'll just educate my heirs! Some folks set up a fairly complicated bitcoin inheritance plan, but assure themselves, “I’ll make sure to educate my (spouse, son, etc.) on self-custody.”
Like any other educational endeavor, you must have an eager and willing student, or it just won’t stick. You can educate them on self-custody as hard as you want, but unless your heir is self-motivated to learn, it probably won’t work well. They may appear to understand in the short term to appease you, but that “knowledge” will leak out of their heads almost immediately. Think back to when you started your Bitcoin journey: if you weren’t that interested and someone started discussing self-custody and hardware wallets, your eyes probably glazed over.
You could blame the lack of self-motivation to learn on the ever-evolving status of bitcoin, but this is not the case. We see it all the time with other legacy assets like art, collectibles, and especially small businesses. Take, for example, a father who spent his life building his profitable small family business to pass on to his children. Sometimes the heirs aren’t interested in running the family store after dad passes. No matter how much that father tries to teach them how to run the business, they just don’t care enough to learn.
You don’t want to rely on your heirs’ knowledge of Bitcoin to make sure it passes properly, because self-custodied bitcoin that doesn’t have a transfer of custody upon your death is basically lost bitcoin.
Letters don’t work with even legacy assets
Even if you are the Shakespeare of letters of instruction, you still won't be able to write a perfect letter to make your heirs understand how to successfully gain custody of your bitcoin. We’ve seen it with even legacy assets: letters of instructions don’t really help.
Why not? Your situation and your assets change over time, and people overestimate their ability to keep these letters up to date. It’s a lot to remember and to actually update your letter every few months.
On the flip side, most heirs (and most humans) are terrible at reading, comprehending, and following instructions. Some people struggle with IKEA furniture instructions... Just imagine how hard it will be to understand a letter of instruction especially after the death of a family member or friend. On top of that, your letter probably won’t be one page long; it will be several pages of difficult things for an amateur to comprehend.
It’s not because your heirs are dumb; it’s the emotional circumstances. We see heirs struggle with even basic assets that they are super familiar with (bank, brokerage accounts, etc.). Self-custody bitcoin would be a HUGE hurdle for a non-bitcoiner to deal with, especially relying only on your letter of instruction.
Bitcoin inheritance treasure hunt
A letter of instruction is too often a “treasure map” to various seed phrase shards or wallet locations. Turning it into a treasure hunt is a terrible idea. It’s an even more complicated and worse version of a letter of instruction. We’ve seen treasure maps and letters of instruction fail for simple things like the keys to a storage locker or the location of important original documents. What happens if things get moved around or your letter isn’t up to date? It’s a dead end more times than not.
For these reasons, we highly discourage relying on a treasure map for any part of your bitcoin inheritance plan. Of course, you can still have a letter of instruction, but it should not be a featured piece of your estate plan. At a later date, we’ll discuss what should be the features of your bitcoin inheritance plan.
In the meantime, check out my book, “How Probate Works,” available on Amazon. It will help you understand the steps of probate before you further complicate it with Bitcoin.
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