When people make plans for their assets in anticipation of their demise, it does not necessarily mean that they wish death upon themselves, but they understand the importance of passing on these fortunes to a capable hand that will inherit them.
Common assets people usually bequeath to their loved ones include cars, lands, jewellery, stocks, property, art and money. However, since the use of digital currencies became quite popular, people are now adding them to their investment portfolios, hence, this provides the need for people to include their cryptocurrency assets in their will before they die.
Some crypto icons have advised crypto investors to share their private crypto keys and wallet passwords with trusted family members or friends to make sure their crypto fortunes do not waste when they die but can we trust people that much?
Almost everyone knows the process involved in bequeathing physical assets to family and friends, but the process of bequeathing digital assets like Bitcoin is not so common.
According to a study by Angus Reid in Canada, only one out of four people has revealed their crypto account and password to another person.
Since you’re expected to keep your account details private, what happens to your digital assets after death?
In this article, we will discuss how to include your Bitcoin and other digital assets in your will and what happens to them posthumously.
Understand How Your Crypto Is Stored
Just like you stash cash in your leather wallets, cryptos are stored in wallets but not in those leather wallets you know. There are two main types of crypto wallets; they are either digital (hot) wallets and physical (cold) wallets.
Digital wallets are not tangible, rather they are managed on an app or a website. The physical wallets are tangible and they look more like a thumb drive and nothing like those leather wallets you have in your back pocket. The kind of wallet you use depends on the purpose you have for your crypto.
Below is a brief explanation of the difference between both wallets and what best you can use either of them for.
Online(Hot) Wallets:
Hot wallets are online wallets used for trading and storing cryptos and as such, they are connected to the internet which makes them less secure. On the good side, they are free and convenient to use.
Physical(Cold) Wallets:
Physical or cold wallets are best used to store crypto for a long-term period. You can think of it as a savings account where you deposit money for a long period. Storing crypto in cold wallets is like storing crypto in a freezer.
While hot wallets act like checking accounts where money can be easily moved, cold wallets act like crypto savings accounts where money is locked up for a long period.
Whoever has your wallet password has complete access to your crypto. It could be the third-party exchange, it could be you or a hybrid of both.
Some crypto influencers have advised users to utilize self-custody or hybrid options because funds in the wallets can be frozen by the third-party exchange or attacked as they don’t control the keys.
Make Your Crypto Accessible, Yet Secure
It could be hard finding a balance between keeping your crypto secure and yet making it accessible, but it is not unachievable.
A hot wallet is an online wallet that requires a pin code or password for access, the same as cold wallets. In fact, apart from the password and seed phrase required in case you lose your key, a cold wallet is likely to be misplaced easily, given that it’s a small physical device.
A very good secure idea is a safe box or a fireproof safe where no external damage can affect the wallet. However, store the key, seed phrase and PIN in separate places to avoid anyone bumping into all the items in one place. If that happens and they are the wrong people to behold such information, then your Bitcoin or any crypto in there will be gone.
Again, be creative in constructing a storage method but do not complicate it to a point that you can’t remember what you have created.
Some common case scenarios are people writing fractions of their keys on different papers and hiding each piece in different places. While this may sound like a smart idea, it is a bad idea in reality because if one of those papers is lost, the key is lost.
Make A Clear Plan For Loved Ones
You would surely want to make plans for your loved ones before your demise, you can do this by adding them to your will and allocating a part of your assets to them.
In the case of allocating your crypto assets to them, you can do this by naming them in your will and including a document in your estate plan that shows all your crypto assets. While writing the will, you should include all passwords, PINs, keys and clear instructions on how to locate your cold wallet.
Some cryptocurrency exchanges have facilitated a process to help beneficiaries or next of kin claim the crypto assets when you are gone.
All your beneficiary needs to do is notify the exchange’s customer support of your death.
Exchanges like Coinbase and Gemini have a process of remitting the assets to the next of kin or beneficiary in the case of death. You would need a death certificate and power of attorney to transfer crypto assets from the deceased’s Gemini account.
Keep Your Plan And Wallet Updated Always
As we live, we go through different stages of life and a lot of things, including our status and preferences, change too.
Always endeavour to update your estate plan in such a way that your assets are willed to the right people and the right beneficiaries can access the assets. This is more important when you have time through a life-changing phase like marriage, adoption or divorce.
Also, do not neglect the cold wallets’ maintenance. This can be done in form of timely firmware updates which will eventually reduce the responsibility on your loved ones and eventually eradicate any form of the uprising that may arise after your demise.
Use Exchanges That Can Unlock Crypto With A Death Certificate
Some crypto exchanges have made crypto inheritance very easy for users by allowing them to name a beneficiary in their crypto account. This allows the named beneficiary to have access to their crypto assets after they are gone.
For example, Coinbase allows the family of the deceased to have access to the deceased’s assets with the evidence of some documents like the death certificate and last will.
However, Coinbase does not support this directly but with the services of an estate planning attorney, it is achievable.
Conclusion
As much as people strive to include their physical assets in their last will, sometimes, they tend to ignore the digital fortunes that may be lost forever if not bequeathed to someone.
If you have never thought of including your digital assets in your last will, this might be a good time to make plans ahead of the unprecedented event of death.
