Unlike other asset classes, cryptocurrencies lack personally identifiable features that can allow your loved ones to claim them in the event of your untimely death. Crypto estate planning ensures that your assets are not lost forever.
Read on to learn how to make plans to ensure your loved ones can access your cryptocurrency holdings when you pass.
What is Bitcoin Estate Planning?
Bitcoin estate planning involves making arrangements for the access and management of your bitcoin and other crypto assets after your death. Such planning is critical to prevent the permanent loss of your holdings.
As of June 2023, there are over 800,000 active wallets on the Bitcoin blockchain. Out of those, 15,000 accounts hold more than 100 BTC. Approximately 2.5 million BTC (13.2% of all BTC) is lost forever. One of the top reasons for this high number is the lack of Bitcoin estate planning.
Let’s explore three ways to ensure your digital assets don’t end up in the ‘lost forever’ pile, and you can have something to pass down to your loved ones when you are no longer alive.
Crypto Estate Planning: 3 Ways to Ensure Your Dependents Can Access Your Digital Asset Investments
Traditional assets don’t have the same problems as cryptocurrencies when it comes to accessing them after the owner has passed. Loved ones can simply provide documentation proving their identity and claim to the assets and have them transferred. The pseudonymous nature of cryptocurrencies doesn’t avail the same options. So you will require a dedicated crypto inheritance strategy in place.
Here are three ways to ensure your dependents can access your crypto when you pass on.
Consult a Professional
Engaging a lawyer or tax consultant is a great option to gain information on the rights of your beneficiaries and inheritance tax liabilities. Once fully informed, you can draw up a will detailing how you will distribute your crypto holdings among your loved ones.
Take time to look into the professional you engage and ensure they are reliable. Add an extra layer of security and only leave them with instructions regarding the location of your digital assets and the allocation. You can then safely store your private keys in a safe deposit box with clear instructions left to the bank on who can access it.
Document All Information
While engaging a lawyer is a great move, it might not be necessary if you know all relevant laws regarding cryptocurrencies and inheritance. You may opt to leave detailed documentation that directs your loved ones on the steps to take to access your cryptocurrency when you are no longer alive.
Remember that your bitcoin or any other cryptocurrency holdings may be lost forever without proof of existence. Start with the location and instructions on access. Here are some options.
- Non-custodial software wallets: Indicate the wallet’s name and how they can access it using the recovery phrase.
- Hardware wallets: Leave a detailed description of the hardware wallet’s appearance, where your family can find them, and how they can access the coins.
Consider storing the access information separately from the instructions to add an extra layer of security. A safety deposit box with a reputable bank with excellent security protocols could be an option. Alternatively, you could store the information with a lawyer.
Engage Crypto Inheritance Firms
The crypto estate planning problem has led to the emergence of firms with professionals well-versed in the intricacies involved in loved ones accessing your crypto assets after your death. These companies develop customized crypto estate plans that suit you, your loved ones, and all relevant laws.
Explore options such as Safe Haven, Kirobo, Casa, and Digi Pulse and determine which one best suits your needs. Be sure to carry out your due diligence on the reliability of the company you choose.
Crypto estate planning is essential, especially for long-term HODLers who have no intentions of selling their assets in the short or medium term. An end to your life is not something you can anticipate, but you can ensure you leave your loved ones in a financially secure position by creating a plan for their access to your digital assets after your passing.