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A recent study by the Cremation Institute uncovers the widely shared concerns regarding cryptocurrency estate planning. Most of the participants have no idea what would happen to their crypto assets if they died, reflecting the status quo in the society.
The over 10,000 cryptocurrencies worldwide are hard to track, especially without the owner’s key or login details. Blockchain also estimates the number of investors in cryptocurrencies to have increased to about a hundred million.
With the numbers expected to soar, it will be more likely to have several family members with digital wallets.
Key Takeaways
- Cryptocurrency estate planning is one of the most overlooked practices, leading to billions of dollars in lost fortunes.
- However, with the increasing value and technological progress, it has become easier to safeguard your digital wallets and make them easily inheritable.
- Disclosing your account details or private key in a trust, attorney, or Will can go a long way in helping beneficiaries receive your actual estate value.
What is Cryptocurrency?
Cryptocurrency is a digital currency formed and secured through cryptography. Some of the most popular cryptocurrencies include Bitcoin (BTC), Litecoin (LTC), Dogecoin (DOGE), and Ethereum (ETH).
Most cryptocurrency new focus on the unpredictable prices for one unit. During the Covid pandemic, cryptos, including BTC, had a rocky experience and are still struggling to keep their heads high.
However, investors offer hope and say the depression may be coming to an end. Similarly, a study by the Deutsche Bank interviewed crypto investors, most of whom believe that the prices will soar in the next five years. In fact, most of the interviewed investors expressed their plans to increase their crypto investments.
What Happens to Your Cryptocurrency When You Die?
cryptocurrency
If you die without precise cryptocurrency estate planning, it would be nearly impossible for your heirs to access your digital wallets. So far, crypto companies like Bitcoin estimate that millions, if not billions, of crypto, have been lost due to owners’ deaths and lack of private keys.
As the crypto value grows, future losses would be significant, hence the need to update your estate-planning strategies. Remember that digital currencies are assets that you can’t see or touch. They’re encrypted, so it would be a hassle for heirs seeking to find them without the crucial details.
Cryptocurrencies have been revered for their discreetness and security when the owner is alive. However, once you’re dead, the strength becomes an obstacle. Therefore, it is crucial not to rely on traditional estate planning methods if you want executors and heirs to find and access digital currencies.
How to Make Your Wallet Inheritable
How to manage crypto
The most important details to clarify in cryptocurrency estate planning are the logins to your virtual wallet. The details are called the private key and comprise a string of random characters. You also want to provide the password for the final stage before access to the wallet.
The exact mechanism is used in our traditional banks, using keys to open safe boxes. However, banks can help access the safe deposit virtually if you lose the physical key. For the cryptos, having the correct virtual key is the only way to access the wallet.
How To Avoid Losing Your Cryptocurrency When You Die
Be professional
One responsible way to deal with your crypto wallets is to be considerate of your heirs. Have a well-laid-out plan that ensures it won’t be a hassle for concerned parties to access your wallet after you pass on. This does not mean exposing your details to every family member.
While including the details in a Will isn’t a bad idea, doing so would not always be safe. A Will is public document that anyone can access, and including such information could jeopardize your wallet’s security.
An unscrupulous family member with crypto knowledge can access the private key and hide the wallet from others. The information can also be removed, erased, or left out in copies when individuals want to commit fraud regarding the digital wallet.
3 Proven Solutions to Ideal Cryptocurrency Estate Planning
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Move The Crypto to Exchanges
Cryptocurrency exchanges
One of the most typical ways to safeguard your digital wallets is to move them to an exchange. Different crypto exchange companies, like Coinbase, Binance, and Gemini, apply a more traditional banking method where you actually have a physical safe deposit.
It’s rather essential to carefully scrutinize these largely unregulated exchanges to avoid the many risks they may pose.
Some of your quick checkmarks include;
- Checking whether the firm is validly registered as a securities broker.
- The exchange should dominate social media platforms like Facebook and LinkedIn.
- An exchange firm registered in your country or state would be easier to research and understand.
- Know what the exchange does with your money: Lousy lending and other unsafe crypto practices that would lead to bankruptcy should serve as red flags.
- Be sure that the exchange firm’s support system is working and reliable.
- Your chosen crypto exchange should disclose its reserves. Illegitimate or undercapitalized exchanges try to keep this information hidden.
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Open a Joint Account with The Exchange
Most exchange firms also offer joint accounts, making the transfer of crypto assets smooth. To make your wallet inheritable, you may include your trust or heir as the joint partner in the account. Similarly, you may establish a beneficiary with the exchange holding your crypto.
Nonetheless, it is advisable to review policies for each establishment to understand how the account is managed postmortem and ensure your heirs receive the assets effortlessly.
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Open a Trust Account
Trusts are quick and private
The third and more popular option in cryptocurrency estate planning is establishing a Trust to expedite estate settlement. One benefit of having a trust is that it helps avoid the potentially lengthy and costly probate process.
Sometimes, estate settlement must go through the probate process, especially if the testator dies without a valid Will. Although the probate laws may vary with jurisdictions, the probate process involves having an account of the entire estate and establishing all the potential heirs or beneficiaries.
As a result, the process takes substantial time, and the emergence of unknown or lost heirs could spark conflicts and disputes, further prolonging the process. Therefore, having a trust account for your crypto wallets will circumvent these risks and make transfers to beneficiaries easier.
The only caveat to having a trust account is that you must acquire written permission from the estate attorney for the trustee to transact with the assets.
Make Your Digital Assets Inheritable
Crypto assets are just one example, but you need to provide access to your entire digital life to your heirs. Safeguard your information to access online bank accounts, Apple Wallet, Google Wallet, PayPal, prepaid cards, etc.
Combining all the benefits and funds in these accounts could be significant, and ensuring it benefits your family is essential.
Given the intricacies of the process, we recommend consulting our experts at Record Click.
Please email us or schedule a call for more customized advice about your estate plan, heir search, or assistance in the probate process.
