Bitcoin Plan - April 15, 2021
Clubhouse Stories, Bitcoin News and Other Announcements
Dear Bitcoiner:
If you aren’t on Clubhouse, you might be missing out! There are so many passionate Bitcoiners sharing information and discussing real world issues as they relate to bitcoin. Moreover, there are some phenomenal moderators and participants who routinely drop life changing information and perspectives about being humble and stacking sats. Regardless, Clubhouse is a lot of fun.
However, earlier this week I met a woman on Clubhouse who shared with the room how her father had recently passed away and how she knew he was a Bitcoiner. I want to share with you some of the details of the situation as well as the complexity of what she is dealing with. Permission has been granted to share this story. A portion of this information was received after speaking with the client after meeting in Clubhouse.
The Facts
Sarah (not her real name) joined clubhouse and shared that her father has recently passed away. Her dad, Roger, is survived by Sarah and two other siblings. Roger had significant assets, including a well-allocated retirement account, a modest home, and a mortgaged vacation property. Roger was fortunate enough to get into Bitcoin in 2015. At the time of his death, a significant majority of Roger’s net worth was in Bitcoin.
When the family met after the funeral, Sarah and her siblings agreed to split the cost of hiring a lawyer and having that lawyer serve as administrator of the estate. Sarah and her siblings made an eight thousand ($8,000) dollar deposit for the lawyer’s services. The agreement with the lawyer permitted the lawyer to bill four hundred and twenty-five ($425.00) dollars per hour with a personal representative commission, not to exceed five (5) percent of the “amounts of receipts, including the value of all personal property when received, and upon the expenditures made in accordance with law.”
They were assured that the attorney’s fees were reasonable and would require approval by the Clerk of Court before the attorney would get paid.
Wishing to avoid the complexities of probate administration and to ensure that the process proceeded smoothly, Sarah and her family reluctantly agreed to the outlay of $8,000.00 for the lawyer’s retainer as well as to the commission for appointment of personal representative.
The Issue
While Roger enjoyed a comfortable lifestyle, he did possess some debt. The debt, made up of some end of life medical and palliative care, credit cards, a line of credit, and a mortgage on the vacation property. The debt exceeded one hundred thousand ($100,000.00) dollars.
Their lawyer, in the performance of his duties to the estate of Roger, discovered these debts, confirmed the obligations, and began assessing how to best satisfy them in compliance with the law. Their lawyer, audited every bank account, bank statement, retirement account, mortgage payment, and financial assets to quantify what assets were owned by the estate.
Sarah discovered that, as personal representative of the estate, the lawyer she had hired to assist her family had complete discretion over the decisions related to the estate’s assets and financial obligations. As the case progressed, the lawyer discovered after speaking with Sarah and her older sister that Roger held over 80 percent of his net worth in Bitcoin. Moreover, Roger had secured his bitcoin using two different hardware wallets.
Because the lawyer was the personal representative of the estate, Sarah turned over the hardware wallets to the lawyer after several conversations where she vehemently objected to doing so. Unfortunately, she was required to do so under the law.
Fast forward a few weeks, Sarah and her siblings are having to hire another law firm. Why? The original attorney they hired and consented to becoming the personal representative is seeking to liquidate Roger’s bitcoin. All of it. The personal representative believes that this asset (BTC) is speculative at best and therefore too risky for the estate to hold while he settles their affairs. The heirs disagree with the personal representative’s position but he has all of the authority in his role as personal representative. When a personal representative wants to ensure that the heirs receive cash instead of “this cryptocurrency stuff” the heirs only have one option… hire another lawyer and fight.
What makes matters worse is that some personal representative don’t know or seem to care about the taxable consequences of these bitcoin sales. The personal representative has only to report to the Clerk that after performing his due diligence, he cannot reasonably determine the basis (purchase/acquisition price) of the bitcoin controlled by the estate. This means that personal representatives sometimes make terrible decision and end up assuming a basis of zero for every bitcoin to be sold. It is a tax nightmare.
The Conclusion
Sarah and her siblings are going to have to fight and spend even more money to simply ensure that they can inherit the assets that their own father owned at his death. Roger’s failure to prepare an estate plan is has cost the family the following to date:
Twenty-five hours of billable time by the lawyer at $425.00/hour
Ten Thousand Six Hundred and Twenty-Five ($10,625.00) dollars.
Estimated five (5) percent of the personal property, which includes bitcoin.
Imagine having twenty-eight (28) bitcoin, and having to pay 1.4 bitcoin (roughly five (5) percent) to a personal representative for them to help handle the estate administration. These numbers are simply placeholders and for illustrative purposes only.
Retainer for new law firm.
Five Thousand ($5,000.00) dollars
The unfortunate reality is that this process is completely avoidable. Sarah and her siblings could have avoided significant personal tax consequences as well as the erosion of their inheritance with some simple estate planning. Sarah and her siblings could have completely avoided the necessity to hire a lawyer or even go through the probate process if Roger had simply understood the rules…
Probate administration, inheritance erosion, and massive legal bills don’t have to be the legacy you leave for your family if you have a comprehensive estate plan.
Bitcoin Articles & Information
The Conclusion Of The Long-Term Debt Cycle And The Rise Of Bitcoin by Dylan Leclair
Taproot Activation Discussion - Bitcoin Optech
Metal Bitcoin Seed Storage Reviews - Jameson Lopp
Time Magazine to Hold Bitcoin - Twitter
Mempool.space Receives Bitcoin Grant - Twitter
Podcast: Bitcoin Will Save the Earth - Bitcoin Audible, Guy Swann
Podcast: Scaling Bitcoin with Erlay Protocol - The Van Wirdum Sjorsnado
Bitcoin Twitter
I wrote about this project several weeks ago. It’s been great to see such an interesting project take something difficult to parse like a blockchain and distill it into such breathtaking visualizations (while still capturing so much of what is stored on chain). Moreover, I am incredibly excited to this see this project release its code as open source software so that you “can visualize the bitcoin blockchain from your own node.”
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Thanks for reading! @BitcoinPlanner