Crypto as a gift

[Elena18]

If i want to pass on BTC under my gift allowance, how do i do that in practicality? and even more so if i have a child under 18 that doesnt have the right to open an account?
what are the options? state it in my taxes at the end of the year but keep in my possession in the mean time? move it to a ledger? print a paper wallet? how / where do i report it?
haven't done a gift before.

[Adamski]

My understanding is a gift during your lifetime is classed as a potentially exempt transfer. All you need to do currently is keep records yourself to pass to your beneficiary. This can be simply a spreadsheet. Just so you/ they have a record. Not recorded on your tax return if you do one.

Just a suggestion but a junior cash isa with a building society is the usual way to teach child the value of saving.

[Urbandreamer]

If i want to pass on BTC under my gift allowance, how do i do that in practicality? and even more so if i have a child under 18 that doesnt have the right to open an account?
what are the options? state it in my taxes at the end of the year but keep in my possession in the mean time? move it to a ledger? print a paper wallet? how / where do i report it?
haven't done a gift before.

Well specifically, nobody needs an account to own bitcoin. The point it that its peer to peer. Indeed from one point of view it ONLY exists on the bitcoin ledger, known as the block chain.
Hence children of any age can be given and own bitcoin. They can earn bitcoin, sell bitcoin, buy with bitcoin etc, subject to employment and transaction law. I have bought beer with bitcoin, but they couldn't, because it's beer.

In terms of tax you should definitely make a record of the gift. Both the amount of bitcoin they receive and the value in £'s of that bitcoin. However you are doing it for the child's benefit. They will/may at some point in the future be responsible for any capital gains.
I recommend investigating IHT as your estate may need to pay tax upon gifts if they are recent or large i.e
https://www.which.co.uk/money/tax/inher ... uj06V0vxaX

I would recommend keeping such information about the gift in a place that your executor can find the details. Not just as a PET, but for the benefit of the recipient if they become reliant upon you for such info. Currently IHT and CGT are the only taxes to be concerned about.

I have never given any bitcoin to my children, but did involve them in junior ISA's. I helped them chose investments, but actually made them chose. I then helped them buy, well officially instructed them to buy their investments. Legally they could not do so themselves but could do so under my instructions. I encouraged them to check the performance of their investments and discussed other investments with them. The law is an ASS, legally preventing young adults from learning to act as adults.

I would STRONGLY advise considering the education that this child may need to interact with bitcoin. There is a bitcoin concept called "Uncle Jim" where said family member acts as the font of knowledge and even custody. But what happens when they die? How can other family members buy or sell using bitcoin if it is held for them?

I see some long talks between you and said child.

Ok, paper wallets. I regard them as something to avoid. However my idea is not that much different. You need some bitcoin, which means that you likely need an account with an exchange. The child needs some form of wallet. There are many good mobile phone wallets, ensure that the one that you pick one that is BIP39 compliant, most are. BIP39 wallets have a seed phrase and if you enter that seed phrase into a different wallet it will contain and trade as the first wallet. Now stamp the phrase IN ORDER on a lump of metal. You can transfer bitcoin to that wallet, then delete the wallet. Note that I'm assuming that the child never ran wallet software. Or you can purchase a hardware wallet and keep the hardware.
The child can recover the bitcoin at a later date using the seed phrase. You can use an new wallet for future gifts, created with the same seed phrase.

At some point you will need to discuss security. I doubt that we are talking lunch money amounts.

The contents of hardware wallets can be viewed without access to the hardware. You only need the hardware to sync the viewing software to the wallet or to transact. I believe that there are view only wallet apps that just need the seed phrase, but chose carefully.

Hope this helps.

[Gilgongo]

Why not give the child a paper wallet? The modern equivalent of a premium bond - and probably just as likely to make them money one day

[Lanark]

A few years ago I bought a bunch of Zimbabwe 100 billion or Trillion notes on ebay, they were about £2 each
So a gave a few away as novelty presents saying: "hold onto these they may become collectable in a few years"

A few years later I mention to them, make sure you have those Zimbabwe notes stored somewhere safe, they are going for £200-300 now.
Nobody could remember what they had done with the notes.

Lesson learned: you know and understand Bitcoin, but if you give it to someone who doesn't they will lose it.

[Urbandreamer]

Why not give the child a paper wallet? The modern equivalent of a premium bond - and probably just as likely to make them money one day

Well...

There is a bit of difference.

OK, here is a quick explanation for those who don't know. (not really pointing fingers at anyone)

IF, you "buy" a premium bond, you actually don't. What you do is LEND the government money, and they will offer a lottery gain. At any time, you can cash in your premium bond for the return of capital from the UK government.

Anyone starting to spot differences between for example buying a tea service or house yet?

Let me explain the concept of a "paper wallet",.

BADLY.

The nearest concept is a Swiss numbered bank account. IF that number actually somehow contained gold, Swiss franks, and could be used anywhere in the world.

Sure some can speculate upon the value of bitcoin, Swiss franks, or gold. but the concept is that they have a value outside the promise of the UK government.

Let me repeat that for Gilgongo, WITHOUT the promise of the UK government.

VERY, VERY serious difference. Regardless of your view of that promise, or upon views of the value of bitcoin.

NOT. NOT the same!

Dare I suggest that Gilgongo doesn't know what a paper wallet actually is and is somehow basing the entire post upon the idea that bitcoin is a gamble, rather than venturing a valid opinion upon how to gift bitcoin?

[Gilgongo]

Dare I suggest that Gilgongo doesn't know what a paper wallet actually is and is somehow basing the entire post upon the idea that bitcoin is a gamble, rather than venturing a valid opinion upon how to gift bitcoin?

You're right. Well, not about the paper wallet but about the gamble. But assuming the intention behind the gift of crypto is similar to, say, a premium bond for a child which may or may not make them rich in the far future, then a paper wallet seems more likely to stand the test of time than most other cold wallet formats. That's how I'd give the gift at least. HODL.

[ValentineBarnett]

You're right. Well, not about the paper wallet but about the gamble. But assuming the intention behind the gift of crypto is similar to, say, a premium bond for a child which may or may not make them rich in the far future, then a paper wallet seems more likely to stand the test of time than most other cold wallet formats. That's how I'd give the gift at least. HODL

[Urbandreamer]

You're right. Well, not about the paper wallet but about the gamble. But assuming the intention behind the gift of crypto is similar to, say, a premium bond for a child which may or may not make them rich in the far future, then a paper wallet seems more likely to stand the test of time than most other cold wallet formats. That's how I'd give the gift at least. HODL

Welcome to TLF!

I'm seriously confused as to why someone is simply repeating a post! Please post more about what you want to know or your own opinions.

However a brief explanations of BIP39 and "cold" wallets.

Crypto (like BTC) works with public/private cryptography keys.
With BTC a paper wallet stores a set. Other wallets store a seed that can generate multiple public/private keys. With a hardware wallet (often called a cold wallet) the seed is stored upon a device (which I admit may fail). The public keys may be exported in entirety to receive funds.

Since BIP39 the seed, used to generate these keys can be represented as a sequential list of words. IF you have those words, then you can recreate your wallet using any compatible software (without the old hardware).
The hardware/paper wallet, just makes it easier to spend the funds, as you have the private key/keys to hand.

"Keep your keys in your head", meaning the word sequence. Ideal for refugees, you just need a new wallet and you have your funds.

Not so much for inheritance. The solution is to write the words down or stamp them into metal.
https://cryptonest.co.uk/collections/se ... se-storage

Ps yes I have used this company (they provided excellent service), though my seed phrase's are still upon scraps of paper. Oh and the only reason to think "cold" wallets, is to make it difficult to access those private keys. They should not exist upon a computer connected to the internet. That is what makes them cold.

[GrahamPlatt]

You're right. Well, not about the paper wallet but about the gamble. But assuming the intention behind the gift of crypto is similar to, say, a premium bond for a child which may or may not make them rich in the far future, then a paper wallet seems more likely to stand the test of time than most other cold wallet formats. That's how I'd give the gift at least. HODL

Welcome to TLF!

I'm seriously confused as to why someone is simply repeating a post! Please post more about what you want to know or your own opinions.

However a brief explanations of BIP39 and "cold" wallets.

Crypto (like BTC) works with public/private cryptography keys.
With BTC a paper wallet stores a set. Other wallets store a seed that can generate multiple public/private keys. With a hardware wallet (often called a cold wallet) the seed is stored upon a device (which I admit may fail). The public keys may be exported in entirety to receive funds.

Since BIP39 the seed, used to generate these keys can be represented as a sequential list of words. IF you have those words, then you can recreate your wallet using any compatible software (without the old hardware).
The hardware/paper wallet, just makes it easier to spend the funds, as you have the private key/keys to hand.

"Keep your keys in your head", meaning the word sequence. Ideal for refugees, you just need a new wallet and you have your funds.

Not so much for inheritance. The solution is to write the words down or stamp them into metal.
https://cryptonest.co.uk/collections/se ... se-storage

Ps yes I have used this company (they provided excellent service), though my seed phrase's are still upon scraps of paper. Oh and the only reason to think "cold" wallets, is to make it difficult to access those private keys. They should not exist upon a computer connected to the internet. That is what makes them cold.

Imagine you are “ex-directory”. Does that make you immune to spam calls? Well no, as there are autodialers that just cycle through all the numbers. Could that not happen to your “wallet”? Asking from a position of complete ignorance here.

[Urbandreamer]

Imagine you are “ex-directory”. Does that make you immune to spam calls? Well no, as there are autodialers that just cycle through all the numbers. Could that not happen to your “wallet”? Asking from a position of complete ignorance here.

In theory, absolutely.
Or you may happen upon someone else's wallet when you simply want one of your own (in theory).

That has been a fact from the very start.
A infinite number of monkeys with a typewriter each WILL eventually produce the script to Hamlet. Even if they bounce of each others typewriters.

This is true of ALL cryptography, rather than code's. It's a complicated subject

More specifically, the issue is how the keys/seed phrase is initially generated. Some actually roll dice. And if you do so, you can use the results with ANY wallet, cold or hot.
https://armantheparman.com/dicev1/

A hot wallet keeps the seed phrase upon a computer/phone. Hence at more risk of being stolen.

PS, look at your browser. You may not care, but communication to and from TLF is encrypted. The method is very similar.

[GrahamPlatt]

A infinite number of monkeys with a typewriter each WILL eventually produce the script to Hamlet. Even if they bounce of each others typewriters..

https://ifunny.co/picture/no-shakespear ... -JTQkwAqj8