Smart Contracts and the Future of Estate Planning


There’s an emerging buzz around the use of smart contracts, and it’s easy to see why. Opportunities to use smart contracts are virtually endless. They have already been used for the purchase of goods, in real estate exchanges and in retirement planning. As their use grows in popularity, it may be a matter of time before smart contracts become routine in estate planning. 


To understand smart contracts, the key concepts of the blockchain must also be understood. Blockchain is a public ledger that uses computer code to store information. Each new block on the public ledger contains the information from the block before it, creating a link between the blocks. Any change to the information contained within one block creates a new link in the blockchain. 

The fact that the blockchain is public might cause skepticism. While the transaction is publicly viewable, the information and identity of those involved are only identified by encrypted code. Only those who are involved in the transaction have a digital key to access their information. As a result, these public transactions are not only safe, but data entered to the blockchain by all parties to a smart contract is verified for accuracy and to prevent fraud. 

If the basics of blockchain are understood, the idea of smart contracts is an easier topic to grasp. It is, at its simplest, a conditional transaction verified and self-executed on the blockchain. Party A has 10 apples to sell to Party B for $10, their agreement is executed by coding it onto the blockchain. Once the apples ship, they are tracked electronically with data added and verified on the blockchain. When the apples are delivered, the delivery condition is met and the smart contract self-executes, initiating payment of the $10 to Party A. 


Smart contracts may have the ability to make estate planning more efficient and might reduce the need for probate litigation. First, smart contacts can be more efficient and thus, more cost-effective. Since the transactions themselves are based on a condition, there might be less drafting (or coding) necessary to dispose of a testator’s assets than would typically be required in a traditional estate plan. The verification process inherent in blockchain also may allow for a less formal signing process. 

Smart contracts that execute an estate plan may be more efficient for beneficiaries. If assets are automatically transferred upon the death of the testator, there may be no need to initiate probate, saving both time and expense. Beneficiaries may also avoid the hassle of tracking down the decedent’s estate planning documents, assets and creditors. For example, decedent’s heirs can find themselves digging through mountains of paperwork. When a will or a trust cannot be found, heirs must try to find the decedent’s attorney to locate copies of a will or trust and other relevant estate planning documents. In some cases, the decedent’s lawyer has retired, or files may have been destroyed. 

Finally, there might be less litigation as to a testator’s intent regarding directives in a will or a trust. Because all legitimate changes to information related to a smart contract are verified on the blockchain, no valid changes could be made to an estate document without going through the verification process. If, for example, a testator amends his will, then the amendment is written as a new block on the blockchain, leaving an exact record of the original will and the amendment. The amendment would then go through the verification process and be verified by others on that blockchain. A verified amendment would be valid and an unverified amendment invalid. Thus, there would be no questions regarding the accuracy or inaccuracy of estate documents on the blockchain.


The use of smart contracts for estate planning has the potential to be a popular option, however, there is much uncertainty. Regulatory and legal hurdles may be the biggest obstacle to overcome. This type of automatic disposition anticipated by the use of smart contracts could create a number of issues, which may include, accounting for a decedent’s creditors, executing and recording deeds for the transfer of real property, and probate and trust code amendments. Legislators, government agencies and bar associations will have to decide how to address both regulatory and legal issues for smart contracts in estate planning and the limitations and protocols that should be put in place to protect all parties. 

In addition, for a will or trust to automatically execute, one of the conditions built into the smart contract code would require electronic verification of the testator’s death. Until such verification is available, the issue will be avoiding human error or bad actors causing the smart contracts to be executed prematurely. The best way to avoid a premature contract execution would be to appoint a disinterested party to oversee the execution of the smart contract. It would be similar to a personal representative or trustee our legal system already provides, although their role would be more limited in this context. However, to require a disinterested party to oversee such administration undermines the purpose of a smart contract.

Another issue is that of the unauthorized practice of law. Blockchain coders who will be programing smart contracts may not possess a law license. As a result, there will be those computer coders who may perform actions that should be directed by an attorney, creating a rise in unauthorized practice of law. The legal community and lawmakers will have to address this issue to protect the public from those who engage in unlawful estate planning. 

Finally, is the subject of accurately documenting a client’s ever-changing final wishes. All estate planners know testator’s circumstances change, sometimes frequently. Whether it is having a child, divorce, or disinheriting an heir. The process of actually amending estate documents could become much easier with the use of smart contracts, as all changes are tracked and recorded in the blockchain. Nevertheless, if a client’s wishes aren’t updated onto the blockchain as they occur, and it becomes necessary to rescind an executed smart contract, it could be a legal nightmare. The solution may lie in the upcoming technology of the smart contract itself. It may also lie in the abilities of attorneys to continue emphasizing to clients the importance of notifying their attorney when major life events occur. 

We are just skimming the surface of how smart contracts can be used and incorporated into daily life. There will be issues that need to be addressed, however, there are potentially many benefits for clients and attorneys. Like any new technology, it will require some forward thinking and creative solutions, but the outcome may outweigh those challenges.

 — Callie Capraro is an associate at McDonough Law LLC. She is licensed in Wyoming and Nebraska. Her license in Colorado is pending.

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