Peter Dunworth is a financial adviser for high net worth individuals and families. He joins me to talk about what most people are getting wrong on bitcoin estate planning and inheritance. We discuss:

• Why bother with all this? 
• Legal, asset protection and tax benefits
• Possession vs Title of coins
• Collaborative custody
• Practical components
• Miniscript and technical advances
• Valuation framework for Bitcoin and why inheritance matters

Links:

• Site: https://www.thebitcoinadviser.com/comparison
• Peter’s Twitter: @PeterBTCAdviser
• TheBTCAdviser’s Twitter: @TheBTCAdviser

Sponsors:

• Swan Bitcoin
• CoinKite.com (code LIVERA)
• Lugano PlanB Forum
• Mempool.space

Stephan Livera links:

• Follow me on Twitter @stephanlivera
• Subscribe to the podcast
• Patreon @stephanlivera

Podcast Transcripts:

Stephan Livera 00:00:00

Peter, welcome to the show.

Peter Dunworth 00:00:02

It’s a pleasure to be here. Stephan, Nice to see you.

Stephan Livera 00:00:05

So, Peter, I’ve known you for a few years and I know you’ve been obviously very involved in the Australian Bitcoin scene, especially recently speaking at the Bush Bash and at the Bitcoin live also. And yeah, interested to chat with you about what you’re doing. And you know where you think Bitcoin inheritance needs some work and. Well, I think you have some interesting insights to. But on probably. What most people are getting wrong about Bitcoin inheritance? So, do you want to just start with? I guess it’s normally interesting to start with. Why care about this to begin with?

Peter Dunworth 00:00:36

That’s a great question and I think we as bitcoiners go through and as enormous amount of pain and suffering with the volatility to provide an outcome not only for ourselves in the form of financial freedom, but I guess we invest in this asset or buy this asset in the hopes that will also help set up our future generation. It’s a. Potential, you know, asset that will help solve a whole host of issues that we have and so. Yeah, I think estate planning is really important because for me personally and for our clients, we wanna see the benefit of that sacrifice that we make in this day and age be passed on to benefit our beneficiaries. So, our children and our lives, you know, once we’re gone. And it. Feels sort of quite short side and. Particularly with you. Know some fairly length and time preferences. When it comes to Bitcoin, to think of just ourselves, when this is an asset that has the ability to set up multiple generations into the future. OK.

Stephan Livera 00:01:30

Yeah. So, I guess we can summarize that. There will be better outcomes from a legal and tax perspective rather than, let’s say you know what many people are probably doing, which is to quote UN quote Yolo and just sort of it’s a donation to the network or just kind of hoping that let’s say their wife or their children can recover the coins from a 24-word seed or something like this, right?

Peter Dunworth 00:01:54

Well, this is the. Hardest part I think you know if we think about planning estate planning when? It comes to Bitcoin. There are some. Complexities to it. But I think if you take the time to think about all the outcomes that you wanna achieve, there are some really important things that you can achieve by setting aside some time to do it. And sadly, thinking about one’s death and how people pass on Bitcoin from the grave and there’s actually a title for presentation. The big point? But it’s not a great. Topic that people want to address on a personal level because it’s quite confronting thinking about, well, what happens when I’m not here and. The interesting thing about when you actually go about setting up an estate plan for your Bitcoin and what happens after. You pass is. You know and this is probably quite contentious and we’ll probably get into this a little. Later, but if you use the current legal structures, there are some significant benefits from a tax perspective and from a legal perspective that give you. A whole host of legal preferential legal treatment when it comes to protecting assets. So I think a little bit of forethought and thinking about this before you pass. Can set up your beneficiaries for a much better use of your Bitcoin.

Stephan Livera 00:02:59

Yeah. So, let’s. Go into some of those benefits you mentioned, the legal and the tax aspects.

Peter Dunworth 00:03:03

So, from a from a legal. Perspective. I think there are a number of ways to do this, and. The best way to. Do this is probably to highlight, you know, an example of this. So, in Australia we look after clients globally, but in Australia there is at a divorce rate of say two in three people get. And although it’s still a horrible thing to think about from a personal point of view, one of the things that we need to mitigate from a risk perspective is ensuring that our clients have points for, you know, basically hold on to their coins for as long as possible. And although we as Bitcoin has talked about. The threat of government seizing our Bitcoin in a. You know 6102. Style attack when it comes to statistics, the most likely person to take your Bitcoin, sadly, is the person that you. And so, from a risk mitigation perspective, when you look at the state planning the. State planning might not be of benefit to you and I, but it can be of huge benefit to our children in setting up what’s called a test metric. Trust in Australia and basically all Western democracies that are built on British law have fundamentally a similar type thing that basically this this ability to have a testamentary trust and not what that means is basically you have a will when you pass, they set up what’s called the test metric trust on your death. And then all your assets passed into. That and that. That testamentary trust basically is the strongest legal protection that you’ve got against a family law court from future claim on that. So, if you’ve got. A daughter or. Son, if you wanna leave your Bitcoins. To them and. You think there’s a two and three chance that? Our Bitcoin, you know. That we’ve worked our entire life to save. And hole is going to get taken by their partner in the event of a. Then you wanna put that. In the strongest legal framework that will avoid or mitigate the risk of that happening. And this is where, contrary to you know, and this is quite topical for a big points perspective, there are certain legal frameworks that are developed that can give you protection from that sort of thing. If you play within the framework. And I understand the non-KYC. But if you’re playing in the KY space KYC space, there are some legal protections that are afforded to you that you otherwise might not have. So, from a big pitch of perspective, And I don’t pretend to tell people what to. Do with their Bitcoin. I’ll just make that statement upfront and clear because you’ve probably got one. Of the most. Sophisticated audiences when it comes to Bitcoin and there. Level of knowledge. So, they know this stuff, but they might not have heard from a legal perspective why you would want to entertain that conversation. And so that’s from the legal side of things. There are some protections on that. From an asset protection perspective and then from a tax perspective that that trust structure that gets set up on a death basically allows you to distribute potentially among a number of beneficiaries. So, you can actually lower the tax threshold from distributing from that from that entity. So, all of a sudden, we have. Not only the tax benefits associated with it, we’ve got the ability to lower or mitigate risk from a from a family law or alternatively if you will that happened to accidentally injure someone. There’s no personal claim against those assets because technically, although you’ve got full use and control of those assets, technically they’re not yours.

Stephan Livera 00:06:12

So interesting. So, let’s summarize then. So, there you mentioned like a legal protection and potentially the intent like honoring the intent of the Bitcoin Hodler that let’s say he wants to give a certain number of coins to his son or daughter. That’s one aspect. And you mentioned as well around a tax benefit there that. You may be able to have lower tax applied when you’re passing those coins on and also around asset protection. So, I suppose in the case of, let’s say your estate where to get sued, that kind of thing, there might be some protection in that sense also.

Peter Dunworth 00:06:47

Absolutely, so you’ve covered it off on 3 fronts. The tax is beneficial, the family law, port provisions and the protection from basically a separation of a marriage or a partnership. And then finally protection from I guess litigation from maybe malice or malfeasance that there might be a number of things. So, there are some. Pretty good protections with that and one other question in terms of contrasting with just a simple will like as an example, let’s say the Hodler is OK. I mean just to pick easy numbers, let’s say the Hodler has, I don’t know, just to pick the easy numbers. Let’s say the Hodler has 10 Bitcoin. And he wants to give five to his wife and five to his son or whatever, as an example. And he nominates that kind of thing in the will. How would that be distinct or different in a testamentary trust like you’re saying as opposed to having that sort of spelled out in a will if it can? Be that way.

Peter Dunworth 00:07:37

I’m so glad you asked this question, because the implications of this from a legal perspective. Are quite profound and. What we just talked about doesn’t really do it justice until you see an example of this. So, let’s just. Use the example of a couple the husband passes away, leaves his Bitcoin. Half of them. Five to his wife, 5 to the child. If that wife were to remarry, those five Bitcoin are now up for claim without a testamentary trust. When they’re not in a testamentary trust. So, let’s just say Bitcoin goes to the moon. This wife marries a new person, and it’s not a great relationship. Fall out that partner. Can then turn around and basically lay claim to. Half of those bitcoins in a legal proceeding. In the family. And so that’s kind of a bitter pill. To swallow, particularly if you’ve worked. Your entire life to provide for your family. Now the same thing can happen to the son, who that’s left to as well. They may get married and you know if they get married young, there’s a chance that basically the marriage falls apart. In Australia, the divorce rates are somewhere close to two. In three, which is outrageous. But that’s just what we’re working with from a statistical perspective. So, you’ve got a two and three chance of going through. A divorce and if those bitcoins aren’t in the legal framework of the trust. They’re up for playing, so you know you can be partnered with someone for two years. And then. You know, there might be an affair. Or something like that and that partner then. Says well, you’ve got 5 bitcoins. I’d like to have. Half of them, or if it’s a female, claiming it could actually. Even be higher. But you could have. I’ve seen up to 70. Percent so these legal frameworks are really important. From protecting and hobbling Bitcoin in the long term.

Stephan Livera 00:09:14

I see and I suppose you might also have some insight into family battles after somebody has passed, right? That I guess that that can also happen, right? That that, you know, after somebody has passed, remaining family members are squabbling over who gets what and how much. Is there anything, any insight you can share around that? And, you know, in a Bitcoin context?

Peter Dunworth 00:09:35

I think it’s really important to probably the best rule of thumb I’ve seen is that you know the contest of wills typically happen when assets are distributed unequally or it seemed to be unfair to one of the family members. So that’s the first. Basically, the tip is if you’re, you know, thinking about planning. This state plan you wanna make sure it’s. Fair for everyone. Secondly, it’s really important to communicate what the expectations are for everyone as well, and one of the one of the best things I’ve seen to help mitigate any contention of the will after death has been basically an agreement that all of the beneficiaries sign on an annual or a 5 yearly basis to confirm that. Their expectations are XY and Z and this is what they expect to happen in the world. So this is a document that can basically be presented in court to show that here was the expectation. This is how it was. You did it and it’s in line with, you know, three or four or five documents that they’ve previously signed to confirm that that’s what they’re expectations were. So I think that’s a really powerful tool that from a legal perspective it doesn’t look like it has a lot of weight. But what it shows is a consistency of effort and intent over time, which helps build a case. If that were to ever get litigated.

Stephan Livera  00:10:50

That’s an interesting point. Yeah, and so also. Are you able to help explain the concept between possession and title to those you know to the coins, right? Because, you know, in Bitcoin it’s not your keys, not your coins, right? In terms of the protocol, but the legal aspect is not necessarily the same. So, can you just sort of help explain that aspect for us?

Peter Dunworth 00:11:12

I love this because this is the beauty of Bitcoin, right? Not your key. It’s not your coins and the interesting thing about this is, is that Bitcoin and the cryptography that it’s based on. On basically a hierarchical basis, cryptography ranks a lot higher. Then legal claim. And this is the funny thing that a lot of lawyers don’t quite get, and they think, you know, they don’t understand Bitcoin and they don’t quite understand that cryptography Trump’s legal. And what’s really important is to marry the two. And they’re very distinct. The legal plan to Bitcoin and then you’ve got the practical application or distribution of that and this. Is where I. Think the legal system will have a huge amount of it will have to evolve fairly quickly. Because what you’ve got is you need to marry up not only the legal framework for distributing your Bitcoin, but the practical implementation of that. And that’s where you have a very a very unique thing that happens in the distribution of assets upon a death that is totally unique to Bitcoin. If you look at the other assets that get passed. You’ve typically got property. You’ve got commodities. You might have. You might have. A whole bunch of stocks. You’ve got all types of. The property and you might have some bonds now in legal claims over those assets. There is always an authority to appeal. So, if something. Doesn’t go your way or the assets. Can’t be found. For whatever reason, you can literally appeal to an authority you can appeal to a land and titles office. You can appeal to. A share registry and basically. Say hey, those are meant to be mine. Can you just rename those in my name and basically transfer them to me and it’s? It’s all the problem that bitcoin occurs is that you have no appeal to authority. If you don’t have the keys and your self-custody, then that represents a huge. Well, for you as the beneficiary to the executor and for anyone who’s administering the work. So, for the first time, and this is what’s really interesting from. A legal perspective. These lawyers have no authority to appeal to, to just transfer the ownership of the Bitcoin, because being an immutable Ledger and. Like your keys. Like your coins, there’s no one that we can. Go to no authority. You can just say look, it was meant. To be in this way. Not that name. Can we just backdate that? Ledger and put it in this name. Not the other. And it’s like that’s not how. This thing works, so there are some really severe consequences and you know. We’ve talked about this over the years like the accountability and responsibility in self custody brings a completely new dimension to, you know, the whole probate and process of death and transfer of assets that I think a lot of Bitcoiners really need to be up to speed and ahead of where their legal team is on this because the legal team won’t be able to solve the cryptography. Problem of the practical transfer of those assets. That’s one of the things that terrifies them.

Stephan Livera 00:13:54

Right, I say. And so, I guess just the terminology, if you could just quickly explain for listeners, maybe they’re not familiar. What’s an executor? What’s a beneficiary? What are some of these just terms that you could help explain?

Peter Dunworth 00:14:06

So, an executor is when you pass you. Typically have someone. Administrate your affairs, and that is typically an executor which you appoint in your will. The executors, typically someone close to you that you trust to basically handle your affairs and distribute. Your assets in a way that you see fit. It can be your lawyer. It could be a good friend. It could be your accountant. It could be your financial adviser. It could be one of a number of people, but typically the prerequisite for that is someone that you trust implicitly to carry out your wishes. As you see now the beneficiaries is really simple.

That’s just who’s basically getting the goodies. So, who’s actually going to be receiving or inheriting? Your assets upon death, is it gonna be your wife? Is it gonna be your partner? Is it gonna be your children? You might not have children. You might wanna leave it to a charitable donation or foundation that you wanna. Support and see. Do good work. It could be a number of different things, and this is the beauty and the flexibility of basically creating a will is that you get to determine who’s going to benefit from. You know all your Hobbit.

Stephan Livera 00:15:05

Great and so. With regard to the cryptography component of it, right, the key not your keys, not. The coins, the big challenge, as I’m sure you are very familiar with, is this idea of how can the Hodler retain unilateral access to his coins, but also give access to the executor, in this case to distribute those coins to his heirs or to his wife or whoever, or to the charity. How do you? Sort of square that circle. How do we thread this needle of not, you know, holding the keys but also having them accessible in the event of, let’s say if the Hodler dies or is incapacitated, right? Cause not just dying, he could be incapacitated, incapacitated in some way.

Peter Dunworth 00:15:46

And that’s the thing a lot of people don’t remember. Is that you know you don’t have to die to lose control of your Bitcoin. You might have rubbed your head. Have had a whole host of things. That can go wrong and misses. You raised a really difficult point that a lot of Bitcoiners, I don’t think have spent enough time and attention on because I basically spent my day-to-day thinking about this. Problem and it’s a problem I’ve spent the last six or seven years basically trying to solve. The clients that you know, you look at the list of things that you can do to do that and how do you mitigate risk? Well, you know you can have that set up in a basically a self-custody single site wallet where you might do a shoot your secret sharing where you basically distribute the words across multiple different places, geographically distributed. It might be in multiple different places. And then that brings in the concern around who are you going to trust to actually rebuild? That should be a secret. Sharing in a sufficient fashion that will then transport those bitcoins or send those bitcoins to where?

You want them to go so. So, I mean should be a secret. Sharing is a great way to do it and I think it’s been a go to for a number of people over the years. The interesting thing I look at and. Which is what? We’ve done for clients for probably the last three years, maybe a little bit longer, which solves that and it’s kind of in a similar vein to that is effectively a multi seek collaborative. That’s the arrangement whereby you can have multiple keys distributed to multiple parties. And those parties don’t need to know about each other but you. Just need to. Have a single document that you can basically access to. Basically, get in contact with those people who hold multiple keys to basically bring together and rebuild that multi seek and then transfer it to whatever type of structure that you want to see and this is where I think the multi seek for me. In a collaborative format, solves a. Lot of issues post. Death, and I know. It’s not a popular way to do. This but the best way I’ve seen to do. This is in a collaborative custody. Buy typically we might set up an account where it’s unchanged, or Casa or nunchaku, or it might be whatever platform they want to use, and the beauty of that is, is that these guys are absolute experts in that multi seat arrangement and they have they hold a key for the client. It’s their account, they hold a key as non-chapped or unchained or whatever that might be. We personally set up a single. Key for the. Client so they have control of a single seat and then we hold a default key for them that if they mess up everything that we do, if they literally walk out the room and die. Then, most importantly, we can recover that. Bitcoin for their family, for their estate, for their beneficiaries, and that’s the trade-off we’ve made. And you know, there’s. No solutions, only trade-offs in Bitcoin sadly, and this is something that we’ve had to get comfortable with that you know from a Bitcoin maxi perspective, we don’t think it satisfies 100% from a Bitcoin maxi perspective. Because it’s not 100% ownership of your case, it’s probably 95% of the way there in solving that. Not your keys, not your coins. Because you’ve got basically. Big reputations in all those companies that I just mentioned. And you’ve got a default backup key in US, who we’ve been doing it for, you know, a number of years now. That gets us, I think the best way to solving the problem which you raised when we first started talking about this is how do you share a secret from the grave? Because that’s fundamentally what you’re doing with those 24 words. It’s there’s. Level of trust that’s required at some point in time. If you’re not here and one of the things that I think is the hardest thing to do is and one of the. Things we want to take all clients through is. We want to. Show them that this process and protocol basically works without their involvement, and when they can see that process work without their involvement, there’s a level of pressure that’s taken off their shoulders that they think my goodness, I can actually see something working without my involvement and I’ve got all of the that they’re comfortable with, the trade-offs and this is something that, I think.  Multi seek and this is where I’m really excited about what multi seek brings to the party and the upgrades with taproot and the rest of it. This brings a whole level of custodianship that I think is going to help enable or help move the self-custody adoption from, say, the half percent right the way through to 10 or 20% of the population will now be able to comfortably and confidently self-custody and this is where I think it’s really important that we grow that self. Has to be high because from a personal perspective, probably my major driver in in seeing this happen is I would love to see every coin off the exchange. Now, yeah, from a selfish point of view, I would love to see what this these exchanges do when there are no. Bitcoins on there? Now then, we’re gonna see real price discovery, right? So, trace with is, you know, January 3, get your coin off exchange like, this is what I want to see and. I think multi. Seeing in a collaborative format helps give people confidence. To self-custody when they otherwise wouldn’t, and it opens up a whole. Market to self-custody and Bitcoin that I don’t think has been addressed yet, and this is where I’m really excited for the guys who work at all these multi-SIG companies that I. Think they’ve got? A pile of clients that are gonna come down the road that actually see this as an easier, safer way to self-custody than holding a single seat well.

Stephan Livera 00:20:54

Right. And I think this is something many companies looking at, I know even it’s one there is a you know. It’s one vault. On a product that you know, this is public, right? It’s not private information that, that, that the team will be coming out with something like this that. But as you said, the idea is having a collaborative multi signature provider who maybe holds one key and let’s say in this case the holder holds one key and in and in a two or three setup. Maybe the advisor holds that third key, so maybe that’s one way to do it. There are other ways that it could be done, maybe that maybe it’s like a three or five and they’re holding 2 keys. You know, there are kind of different aspects of how. Could be done, and certainly I appreciate the point about it’s not as a purist unilateral control, but there’s a trade-off that’s being made there around giving that person a little bit more confidence that the keys and the coins will make it to their heirs or beneficiaries. And I think as you mentioned. Having it in multi-SIG across different institutions still really helps because now that concern around pay per Bitcoin and fractional reserve is being mitigated. Dollars, if you can see your clients or see those coins on chain or you know you can see that output there. You know it hasn’t been rehypothecation because that’s all there is. And as soon as you know it, it has to move. There’s no rehabilitation or at least it’s stopping that rehypothecation. So, I think that’s an interesting point. I think it’s also interesting just to chat a little bit about where you’re seeing the space. In terms of as you survey, let’s say the landscape and you look at accountants, lawyers, advisors out there, how Bitcoin savvy are they today, right? Because obviously you people like us, people who are listening to this show, we’re obviously a bit more Bitcoin savvy, interested in Bitcoin, but what’s the state of play? You know, just out there generally?

Peter Dunworth 00:22:43

I think it’s a passing interest at the moment and particularly in light of a two-year bear market, there is very little interest from any professionals wanting to get involved in this and this is where I think for the professionals who are making a name for themselves in this. This there, there is going to be a huge retention and. Effectively knowledge gap for them to basically bridge for their other counterparts. In their professions. I look at from the industries that. We work with. We work with financial advisors. We work with lawyers and you know, we work with investment advisors as well and accountants. And I look at that and. I think the accounts are slowly getting up to speed. Because there are. You know, they basically have to. Account for it and they want to. Account for it on. A on a decent way. And it’s very interesting seeing them try to wrap their heads around basically, you know, basically transaction information that’s been taken off the block and just thrown at them. It’s very different to what they’re used to. But what’s interesting is from a. You know from an immutable perspective. And from a. A confirmation of trust, that information that they get there is way more trustworthy than any of. Numbers that they get from anything else and you know, a joke I love to share, which you probably might appreciate is how do you know if you’ve got a good accountant, ask them what 1 + 1 is? If they’re any good, they’ll look behind them, shut the blind, and then they whisper gently in your ear. What do you? Want it to be and that. Basically, is the problem with the accounting system that we’ve got at the moment, the double entry Ledger, which I think back to Bitcoin and the beauty of it, the immutable Ledger. And a triple entry Ledger system is going to solve a whole host of those problems that there’s going to be a lot less fudging that we can do with the numbers because it’s a fast period form of accounting. But back to the point around what does what do the changes mean?

I think there are some very forward-thinking professionals in the space. I know we deal with a number of state planners. The space we do with some. And other investment advisors and they’re trying to actively pursue this and understand it because they see the opportunity that’s coming. They just don’t have any resources to draw on for further product or professional development, so that that’s probably a bit of a missing gap for helping other professionals get into the space. There’s just a huge amount of hard work and hard. Well, that you’ve basically gotta get stub your toe. Make all the mistakes yourself before there’s a learning curve. There’s no manual for any of these professions.

Stephan Livera 00:25:08

And even when it comes to things like Bitcoin competence, right, understanding how a multi-SIG works, understanding how a hardware wallet or a hardware signing device works or understanding. Maybe if you’ve got a 24-word seed but it’s part of a multi-SIG and that is only one piece and that you need multiple signatures in order to be able to sign that transaction. So, things like that. I’m sure there’s a lot of learning that has to take place over time, especially in the case of that executor who’s having to execute this stuff and potentially the professionals, whether they’re legal, accounting, tax advisor. Personals who are guiding and maybe even in it, depending on the situation. They may be holding a key in this is also.

Peter Dunworth 00:25:49

There’s a learning curve that needs to happen and this. Is where I think partnering. With professionals in this space is really important, particularly on the transfer of death. And one thing that’s really unique and speaking from experience, you know, proud but sad at the same time that, you know, we’ve overseen basically the transfer of three estates now. From death to. Their beneficiaries and there. Has been some great stories around. That professionally, I’m really proud to say that we haven’t lost a single Bitcoin with the protocol that we’ve put in place. So, a collaborative multi seek custody whereby Unchained holds the key, the client holds the key and we hold the key has worked absolutely seamlessly. There’s been zero loss and there there’s been. A couple of funny stories I might. Just talk in hypotheticals because. I’m not allowed to talk about. Clients, but should I? Many minutes ago, you came and helped us with a. Whole host of. Things and one of those clients have sadly passed away, but we were able to safely transfer those Bitcoin. From this person, who happened to be about mid-80s to. To their children. And a funny thing happened when we were basically going through the process. We managed to seamlessly transfer them to the client and at the same time I looked at their asset allocation and realized 60% of their investable assets were invested in Bitcoin and. I was shocked. I was like, I didn’t quite realize it was that high and when I went to the children to say they just wanna let you? Know we’re probably a little bit overweight and. Should we rewrite the portfolio and do that? And one thing I need to thank you for with your work because you know you helped educate them.

They turned around and said no, we’re really comfortable with waiting we don’t need. To readjust anything. So, I’ve gotta say. I’m so happy. You know, it’s saved a whole host of things, but the transition. We’ve seen this and the transition would have been seamless with or without their hardware device if we had it or not, we could have got that to them and we’ve had multiple experiences where clients have walked out the door. I’ve said be really careful with this key. Be really careful with your seed. Words lock them up in a safe or safety deposit. Box or wherever. You do it and you know treasure them. Because it’s really important and literally a month later we’ve had. A client call and say I’ve lost the words. I’ve lost my device. Have I lost my Bitcoin and I could have thought with hand on heart, so happy about this? I said it’s like no, but you. Need to come. In as quickly as possible, because we’re down to two. These, and I’d never want a client in that position. That they’re reliant. On the two keys. So, we got the client in as quickly as possible. They are very. Grateful that they. Hadn’t lost that. Because there was basically. Millions of dollars on the line. And I think the comment came. Back well with you. Know I’m so happy, I think I would. Have had a divorce. My wife would have divorced if I. Had have lost $1,000,000 sitting on. That single device. So, this is where I’ve gotta say from. You know, doing this for years, the experience I’ve seen in how little attention some people can pay to that, you know, that hardware device and the redundancies that are built in with the collaborative custodians. It’s not for the Bitcoiners who want to have full self-custody, but it’s a it’s 95% of the way there. And it’s probably. The best solution that I’ve found to basically ensure that you can transfer your Bitcoin to your beneficiaries.

Stephan Livera 00:28:56

Yeah, that’s really interesting. And I think perhaps in the future now this is something actually I can share. I recently was at BTC Prague and I was chatting with some of the guys from the company known as Revolt. But they’ve got a product called Liana. And this is using an advanced Bitcoin technology called Miniscript, and there’s potential here and this would be very interesting for you in the future as well is using miniscript. It will be possible to put in even more advanced conditions such that the Hodler the user can be full self-custody and there can still be a sort of recovery pathway. In the future now I should disclose as part of Bitcoin adventures, we did invest in that company, but I think just broadly about miniscript it can enable more advanced scripting with that multi-6. So as an example. We can do all kinds of things like, OK, let’s say you and I were in a business together, Peter. We could set up a two of two for spending, but after six months of us not spending, it becomes a two of three. So, it’s like an expanding multisig, and let’s say the board, the director of the board has a key and he can sign in the case that you and I don’t agree, right? Or there’s like this idea of a kind of a deep recovery key. So, you could have it so that, let’s say, it’s normally a two or three or two of two or normally you know in our full self-custody. Or the hodlers self-custody. But if it’s not been spent for 10 years, then and only then can the provider have this kind of I forgot my password functionality and so maybe it will sort of help thread the needle. Now to be clear, this is very early, it’s very techie, it’s, you know, extremely early stuff, but I think. If we were too Fast forward 5- or 10-years’ time, this might be a lot more commonplace and take it even to the next level.

Peter Dunworth 00:30:41

I think you’re right on that and I’ve talked. To a number. Of different teams, I think I’ve gotta call in with those guys because what I find really interesting. Is from a basically a term we call in the state planning ruling from the grave with the testamentary trust, you can basically issue a legal mandate that as part of the trust, you’re only allowed to draw an income from the trust and you’re allowed to take 1% in the first year, 2% in the second year, 3%, and you can literally stage. You can rule. Rule from the brave as well. Now that’s up for legal. Contest when it’s in the will, however, if. You programmatically cryptographically secure it. There’s no discussing, there’s no debate. It just is what it is. And that beneficiary then has no legal recourse, because even if there is legal recourse to it, there’s no cryptographic recourse to it.

Stephan Livera 00:31:33

But blockchain does not recognize the legal authority, let’s say.

Peter Dunworth 00:31:38

That’s exactly right. So, there are just. So many wonderful things. Coming down the road with the programmatic. Being able to program Bitcoin that from a state planning perspective and being able to basically plan out how people are gonna spend Bitcoin in the future or how they’re gonna inherit it. there’s no other asset on Earth that comes close to it and this is where you know my day-to-day is basically dealing with high-net-worth families and. How to secure that wealth? Into the long term, once they really understand. Like the broader, you know, high net worth families really understand how powerful the tool. This is that no other asset can deliver these. Sorts of things that Bitcoin can. Gains over like they’ll be a much higher percentage of their assets in Bitcoin.

Stephan Livera 00:32:16

And I think that’s totally right. I think for a lot of people that can be a hang up. I’ve heard this is a common thing as well, even from customers and just people in general that there are people who maybe they are hesitant to self-custody. Bitcoins, because of some of these considerations and because of that reason, they just think I’d rather trust somebody else. Now of course you and I and probably most listeners are thinking no, not your keys, not your coins. We want you to be self-sovereign. You should self-custody and of course you know I do. Anyone who can self-custody. You should I definitely. You know, I say that that I’m just recognizing the reality that there are a lot of these high-net-worth people. Who are not comfortable with that until maybe the technology and the security and the safety of this stuff is improved? And maybe that comes with further miniscript adoption and development and technology, and part of that is also the legal aspects and the accounting and the advisors all skilling up. And creating products and services around this kind of thing as you have. So do you, yeah. Do you want? To, I guess. Tell us a little bit about the journey that they that a customer would go on if they’re trying to set this up with you. Just so people understand. Like what does it look like in practice?

Peter Dunworth 00:33:22

Well, I’ll take you on a journey there. There are two types of journeys. There is a journey for a seasoned Bitcoiner who understands exactly what we’re doing and how we’re doing it, which I have great joy in basically delivering because once they see all the built-in redundancies and backups that we’ve got. It takes a huge amount of pressure off their shoulders, and particularly if they’ve been operating outside of that multi seat in. A single seat environment. But from a client who’s completely new and this is something I’m really proud of, that I don’t think anyone else on Earth does literally is that we have the ability to take a client who is completely new to Bitcoin, has no Bitcoin whatsoever. And set up an account for them. Set up an Unchained account, help them buy Bitcoin, set up a hardware wallet, and literally set up a multi seat vault that they have full control over and they can have Bitcoin in there within an hour. And this is something that I’m really proud of because it’s a far better solution than leaving Bitcoins. Exchange it gets us probably 95% of the way there to satisfying that. You know Bitcoin maxi Puritan type thing. And I haven’t met a Bitcoin maxi yet who thinks that that is a worse idea than leaving it on the exchange, and then that gets people really deep down the rabbit hole really quickly, and clients either are happy just saying that. It’s all looked after and. Alternatively, it sparks. A curiosity for them that they want to understand well, what’s this multi seek? What’s this hardware? Well, how does this work? What are the consequences of doing XY and Z? And they can start playing with it. But our clientele typically much older, so they need a lot of hand holding to get through that, and it literally might take an hour or two. To get all of that set up in Bitcoin. But the beauty of that is it gives them confidence that they’re working the professionals. That know what they’re doing and haven’t lost to Bitcoin. So most importantly, they know they’re not gonna lose their Bitcoin because everyone’s heard the stories of, you know, the guy basically throwing his out, throwing out his hardware drive in England and basically trying to pay a rubbish tip. $64 million to recover £300 million in Bitcoin. Those sorts of things don’t happen and. You know, particularly in. Light of what’s happening with finance, which is quiet.  It’s the 13th of May. 2023 we’ve got, you know, the SEC’s reviewing and investigating finance. You’ve got point based and legal action with the SEC. One of the world’s largest, so the two largest exchanges. On Earth are basically in legal proceedings with the. This Securities Commission and this self-custody and multi seek basically gets clients out of the way of any regulatory framework that they could basically fall under and it helps them self-custody. So, it’s a much better outcome I believe than what’s available at the moment leaving. It on exchange.

Stephan Livera 00:36:02

Right. So sorry, 13th of June, not may, but, but yeah, that’s certainly at that point. But no, that’s correct and certainly getting out of the blast zone, right, the radius of these exchanges that can get shut down, or custodians that can basically screw you over. Whereas if you are in a collaborative custody or some kind of multi-SIG context and your self-custody and you’re just you’re just miles away, you’re miles out of there. And so that’s really interesting. I think it might be interesting as well just to talk a little bit about legal approaches around the world, right, because obviously you and I are both Australian, but how does it work in, let’s say other big countries around the world like the US, like the UK or others?

Peter Dunworth 00:36:43

From a client perspective. Do you do? That or how would a multi seek collaborative custody?

Stephan Livera 00:36:48

Yeah, I guess, yeah. I mean, just in terms of the legal aspects, are there legal differences that change how you have to operate this or is it essentially the same kind of operating model regardless of what legal, you know, environment they’re operating in?

Peter Dunworth 00:37:02

Framework is from my experience and we’ve basically got calls into the US, the UK, Europe. We look after the US, the UK. Europe, now we’ve. Got clients in Portugal, Asia, Hong Kong. Nepal, New Zealand and Australia. So, it’s basically global, but when you look at how this is set up and what is the service that’s delivered, it’s effectively a technical service. So, despite the fact that I’ve got a financial background in Australian Financial Services license, we’ve gone through all of the licensing regime with our compliance team to look at well, what type of financial product. We’re actually delivering advice. On here and without giving any asset recommendations about how you need to have 5 or 10 or 50% waiting to Bitcoin, which is something you don’t really get into, that basically lives outside the financial framework and the regulatory guidelines from a financial product perspective. So, in Australia, there’s no legal framework for giving advice on Bitcoin. Because it’s not classified as fun. Product in the UK? That’s a similar thing in the US it’s not a financial product. We’ve seen the CFTC basically designated as a commodity, so it doesn’t skirt that. And then when you are setting up a collaborative custody arrangement, if we were to have control of two of the three keys, then that represents a very different model. That effectively you need to be a custodian. You need to have all the you need to submit to all of. The rules and. Regulatory requirements that a custodian would have to. Submit to in any of the designations that they wanna play in, but when you’re only holding one of the three keys, you have no control over that, so there’s no way in, well, there’s no legal way. There’s no possible way for me to control those bitcoins, so by default we have no control of that. So, we’re not a custodian. What we are is effectively a default backup key. And we’ve set up a really neat system and a protocol that, you know, part of the reason of, you know, wanting to talk to you is to share that protocol that we think can help. Improve clients’ outcomes and this is something we’d love to help with if you know they’re not capable of looking after it. But we wanna share this with the world because this is basically six- or seven-years giving advice on Bitcoin for high-net-worth families. This is the best we’ve come up with to help transfer wealth to the next. Generation and you? Know for all the Bitcoiners who are here now. You’ve put in a huge amount of work and effort to get to this point, and you’re really early and it would be a shame not to capitalize on that if you don’t secure the transfer to your beneficiaries. So yeah, that’s part of the process of what we wanted to deliver.

Stephan Livera 00:39:32

And just from a legal perspective, you mentioned the testament. Does that change in across jurisdictions or is it like a different entity or different kind of vehicle that’s being used in other jurisdictions? Or is it essentially, yeah.

Peter Dunworth 00:39:45

So, the US has got a whole host of things that you can use you can use and irrevocable living trust, I think is one of the things that they determine where you can basically put assets in a trust now and that can be for the benefit of your future generations that you’ve got full control over until you pass away which is. Of doing it. Again, there are some legal. Carve outs that effectively help protect you in the event that you have a divorce. If you’ve claimed that legal trust, it’s depending on which state you are. Louisiana was the worst state to be in, because that’s based on French, French common law, not British common law. You’ve also got some, I think, in the Western. You’ve also got some Spanish influence on. The legal frameworks there, particularly California, the rest of it obviously with the connection to Mexico. So, the testamentary trust in Australia, they work really well, but under basically all British law basically has that foundation or some inkling to that. So, I would suggest having if depending on what jurisdiction you’re in, have a chat. To an estate planner in that and ask for the equivalency of a test metric trust to be set up. That would protect you and give you those protections and tax advantages.

Stephan Livera 00:40:57

Great. And so, for listeners? Who are unfamiliar with the? The inheritance taxes, could you just give a rough overview of what that looks like around the world? I know obviously you have to give every country, but just for major countries, what does inheritance tax look like?

Peter Dunworth 00:41:11

It’s rough, it’s. Really rough, I’ve gotta say, like depending on where you are, let’s start with the US because that’s the biggest market. And you know. I love the US, but you know, I’ve heard you know that the US has. Some form of death duties to the tune of 40%. That’s a big whack to pay on the way out the door. So, if you’re inheriting something from, you know. From your father. Or your mother, or other some other loved one. You know, the government could take a 40% clip of that straight off the top, so if you’ve. Got 10 bitcoins, you? End up with six. That’s a real pick. That’s a real kick in the guts. Like, that’s really hard you. Look across the UK. In Europe, they’ve got similar death taxes. Ironically, Australia is a great place to die. We’ve got 0. Zero death duty and another great place to die.

Stephan Livera 00:41:54

No inheritance tax.

Peter Dunworth 00:41:58

And this is. Can’t believe we’re laughing about it, but. A great place to die is New Zealand as well, so you know, despite being, you know. Cleaning the lockdowns and. All that it’s a great place to. Die because there’s no inheritance tax. There or death dues.

Stephan Livera 00:42:13

And yeah, I guess it this can all change. Like there’ll be there might be changes on the. OK. And even who knows, right? In some countries there may be wealth, taxes or even worse, unrealised gains taxes.

Peter Dunworth 00:42:24

Oh, my goodness.

Stephan Livera 00:42:24

You know, so even that’s something to worry about on the way. There and then. Some of these countries will have a tax even you know, you’ve been paying taxes all the way through. And then after you die, here’s another you know, 40% or whatever pay up. And so that’s unfortunate.

Peter Dunworth 00:42:38

It’s horrible and this is where, you know, there’s a tax arbitrage going on right now. You know, you look at, you know, there’s a whole host of expats leaving Australia because they can live a, you know, live a, a quality life overseas. Paid very little tax. Our tax rate in Australia is 40. 9 1/2. Percent you know, on a person that’s you know. That’s quite big. We don’t get a lot of incentives. There’s not a lot. Of things to. Write off and. You know, there are really close tax jurisdictions like you know, say. Singapore or Hong? Kong, which might charge a maximum of 10 or 15% tax. That’s far more appealing. And you know. 50% tax rate. And then there’s capital gains. Tax to pay on. That as well.  I think what what’s apparent to me is you. Know we need to be vigilant. From an advice person. Give that. Yeah, it’s very. Clear to me that the governments are running out of money and they’re running out of options and an easy low hanging fruit for them to. Basically, claim is an inheritance tax of rich people let’s just tax them 50%. They don’t need it. They didn’t earn it, you know. We’ll just take it. And you know who’s really gonna cry for, you know, someone who’s inheriting. 50 million instead of 100 it’s an easy sell to the to the public, but it sets a very slippery slope that the public doesn’t realize that if they’re in that state, the government finances are in a shocking. OK, so basically your beneficiaries can basically shop jurisdictions on where they. Want to accept? Their inheritance and. That might lead to a better outcome. So, you might become a New Zealand resident for a year and basically pick up a tax-free inheritance.

Stephan Livera 00:44:07

Interesting idea there and also, I had a couple of comments in who were saying you’ve gotta ask Peter this one. This one’s for the moon boys. So, they want to know about Peter that they want to know your thoughts on where you think Bitcoin is going in terms of valuations. You’re known for being an Uber ball, so can you give us a little bit of? An overview there.

Peter Dunworth 00:44:28

Would you like the number or would you like the framework? I prefer to talk about the framework.

Stephan Livera 00:44:33

I think that I think the framework is a better discussion piece.

Peter Dunworth 00:44:36

Right. Well, the framework I’m much happy to talk about cause I don’t like talking about the number because it seems quite insane to tell you the. Truth. But let me. Just set the framework for. Firstly, if everyone understood just how bad property bonds and stocks were, and how much risk was residing in those relative asset classes, Bitcoin would be 10s if not hundreds of millions of dollars. Right now, there is. There are so many problems in. Those asset classes I. Can’t begin to tell you and. We need a whole hour at least to discuss. All those, but if we look at. The framework for what Bitcoin is, and you know this has been a study of money for me for a long time, I’ve been involved in accounting and finance at university, been in credit markets. My job is literally to mitigate risk and you look at what Bitcoin is and fundamentally I think it’s a function of money and you look at those three functions of money we’ve got store. That you need of exchange and unit of account. The money, interestingly, and I don’t see a lot of this talked about, but I think the key innovations that pertain to those three functions and money from bitcoins, you know, tech innovation perspective is absolute digital scarcity of 21 million which we’re familiar with seizure resistance which is a novel thought and it’s only been available. Since Bitcoin’s been invented, because up until now the $5 venture tax basically got you everything that person had, because either they were holding it on person or alternatively there was an appeal to authority that you just took it from. So, this is a very unique concept seizure resistance. And you know. I’m not sticking up for. Russia here, but I bet they really understood. Bitcoin prior to having their 500. Billion in foreign reserves held or frozen. I’d call that seized, but then you look at the second or third innovation with, you know, tech innovation with Bitcoin has been the censorship resistance. You know, that is a huge improvement. On what we’ve currently. Got anyone who subscribes to the networks? Rules can basically place a transaction or make a communication a message on the system which we abstract to a dollar. Hey, now you know I was particularly concerned about the disregard for the rules and laws that have been in place when the Canadian truckers basically protested and I thought they were within their rights to do that. They may have overstepped the mark, but I thought what was an egregious overstep of, you know, the governments there was without any due process, they basically. Throws the truckers bank accounts. Now the whole Western democracies are built upon the presumption of innocence until proven guilty, not the other way around. So, I was particularly disturbed saying that. The governments were basically happy. To floor process on the. Proviso that they. Thought terrorists were gonna take over the country, I thought. That this is a really slippery slope that I don’t want to see because, you know, it was convenient for Canadian truckers. But what happens when it’s, you know, Mum’s complaining about something? You know, it’s a very. Different slippery slope. So, censorship is. A big, big deal. And then the. Final one which I think gets no. But maybe you and I can froth on this for. A little while because you know we’ve both got. Somewhat of an accounting background is the immutable leisure supply issue. Now it gets no love because it’s really boring topic and accounts aren’t known for being the. Life of the party. But this is where the.

The real value in Bitcoin lies is that in an immutable Ledger it opens up things that we haven’t thought about. So, if you think about those four key innovations and how that applies. To Bitcoin and. The functions of money. Store of value basically gets an upgrade on gold because it’s absolute digital scarcity and its seizure resistant. So that is unequivocally better than gold. So, it should be at least a 10 to $14 trillion market cap depending on the day. From medium exchange it gets an upgrade on the US dollar that we’re currently using. Which is 100. Trillion-dollar market, give or take. Depending on the day. You’ve got censorship resistant, which is a huge thing, and then you’ve got an immutable issuance and supply, so you know exactly what’s coming and when it’s coming, which. Is much better. Then you know the 40% increase in the M2 money supply that. You know, two or three years. Like on top of that, we’ve seen a six or 7% decrease in the. Money supply in the last you know, year. So, it’s like it’s just so chaotic trying to determine an economic system with that type of volatility. So, it’s an improvement on medium exchange and then the final one, the grand one, which I think holds the most value is your unit of account basically. Bitcoin represents an upgrade on the double entry Ledger technology that we’re using at the moment. That’s basically 500 years old from the Venetians. Basically, we haven’t had any upgrades to. Accounting in the. Last 500 years, so this represents a triple entry Ledger system. It represents an immutable Ledger that can’t be chain. And we’ve got an immutable supply and issuance. That goes across with that. As well and all of. A sudden this expands I. Think the ability of unit of account to account for a whole lot more than what it does. It expands it high dramatically and where I think Bitcoiners have probably not thought about this from a market perspective is that for the first time in history. And I called. Bitcoin, the first triple point asset. So in thermodynamics the triple point is when in a. Beaker of glass. You have, say, water sitting there, but under certain pressure under certain temperatures. You get not only. But you can have ice and you. Can have steam all in the one beaker at the one time. And so I called Bitcoin the first trip point asset because you have basically with an immutable supply and absolute digital scarcity. It’s a pressure that basically gets put on the money that you have all three forms or functions of money in one asset at the same time. And what’s unique about this is, is that you’ve got Bitcoin as the best store of value. It’s the best means of exchange and it’s the best unit of account and now this is a revolution in historical terms that never before have we seen one asset dominate all three functions of money. And so my contention is. Rather than thinking about Bitcoin being a linear accretion of value whereby you take 10 billion market. Cap of gold. 100 trillion for meter of exchange in the US dollar and I think unit of accounts running at 2000 trillion. But you put whatever numbers in you want to most Bitcoiners are thinking about this well you add 10 trillion + 100 + 2000. Get to $2.1 trillion personally after watching how ironically. How people do crazy things when scarcity is basically in play, I’ll give you a quick example. I’ve watched people lose their minds about 300 meters from my office down there in Double Bay, Woolworths, when the toilet paper was running out, people were having physical fights when they thought the toilet paper was running out now. It is not gonna be on the shelves for two days and people could have gone home and had a shower, used a bit a used a leaf, used a tissue. There are multiple ways to basically. Work around no toilet. Paper, but people. We’re getting in physical fights because they thought it was scarce. Now what happens when 8 billion people realize that Bitcoin is absolute digital scarcity and they’re all competing for one asset? This is where I think rather than thinking it’s a linear accretion of value, I think it’s more like store of value. Multiplied by negative exchange multiplied by unit of account and Bitcoin can hold an infinite value. So all of a sudden people are gonna really understand that this thing is worth way more than we can. We can possibly imagine.

Stephan Livera 00:51:46

Yeah, I think that’s a fantastic framework. And I think really people should take it seriously. This idea of its, you know, it’s starting, it’s a digital property, right. Like Michael Saylor says. But over time, it’s going to evolve into so much more, and it’s going to be an everyday currency that we’ll use. And as you say, it will be the unit of account. And so, for those of. Us who are thinking ahead. We value our net worth in Bitcoin terms and we are serious about planning for the future because right, if you believe if you truly believe Bitcoin is going to be the money of the world, it will be the unit of account of the world someday. Maybe not today. You know, it might be decades, we don’t know. It I guess it behooves all of us to really take it seriously and plan so that our children can actually receive this asset rather than it being a donation to the network, as Satoshi famously said. So, let’s conclude with a few actionable pieces of advice. Do you have any key insights or key points that you want to make sure if that if you know if there’s one thing they took away? What’s the key piece of advice or insight? You would give them.

Peter Dunworth 00:52:48

I think if I could ask everyone listen to this podcast to. Do an exercise. If they can ask their loved one or their most trusted hand them a piece of paper with a note. On it saying. Please attempt to move my Bitcoin. Now it’s a scary thought. It’s very daunting and I don’t wanna, you know, scare people. But by doing this simple exercise. You will understand if your estate plan is up to your death or not, and it’s the most critical piece and this is literally what is. And my time just staring at that problem. Please go and ask. Someone who you know is part of your plan to go and move your Bitcoin now. I don’t want them. To actually move it, I just wanna see. If they’ve got. The capability of doing it because then you can basically. Put everything aside and know. That your estate plan is sorted. If something were to happen to you today. And this is what I don’t think a lot of people have actually done is gone through the disaster recovery. Have they actually tested their estate plan as to the recovery of their Bitcoin? Have they literally handed a piece of paper to a loved one and said Hey, I need you to move these Bitcoin? Now there are Ways and Means around doing this without actually showing them your stack, and they understand most bitcoiners don’t wanna share that information. But it’s really important that they understand the process of that and how they would actually do it, because you know, I I just think. About all of. The hard work that’s gone on. You know you’ve been in this space for 10 years. You know, you’ve been doing this for. What is it? 566 years there.

Stephan Livera 00:54:13

Yeah, just about five years of podcasting.

Peter Dunworth 00:54:16

And you know, I remember, you know, the early conversations we had and all. The help you. Gave our clients. And I think all. Of us have worked so hard to be at. This point, please don’t drop. The ball over the line in football. All up, you’ve done all this work all you need. To do is. Put the bill down, make sure your state plan sorted, and if you want help, any guidance there’s I might get in the show notes just left up there. A comparison table that we put up in for clients. Basically, all the things that we consider, and it’s a free service that we basically put up there and say, here’s the things that we do and. Please go and rip this off and implement this in your own in your own day-to-day, and if you’re. Incapable or you don’t wanna. Do that, then I’d love to help. You, but you know like. Everyone says not your keys, not your coin. We wanna basically give that protocol to the world that you know, hopefully it can bring Peace of Mind and secure those bitcoins for future generations.

Stephan Livera 00:55:08

Fantastic. Well, I’ll put all the links in the show notes and it’s the Bitcoin advisor.com that’s advisor with an ER, the Bitcoin advisor.com/comparison. And of course, Peter, I’ll. I’ll hope to speak again with you soon, and thank you for sharing some, I think very valuable insights for listeners because many of us don’t want to think about us dying or being incapacitated. But it’s gonna happen someday to all of us. So, let’s be serious about it, and let’s be responsible about this. Thank you, Peter.

Peter Dunworth 00:55:36

Appreciate your time. Thanks, Stephan