Crypto Inheritance: What Happens to Your Crypto When You Die?

by Sep 10, 2023Blockchain Technology0 comments

Imagine someone you know becomes wealthy from cryptocurrency and then passes away. While you are grieving, you may also wonder what will happen to their assets. If they have left you any, you might be unsure about how to access them. As the cryptocurrency industry develops, one aspect that is often overlooked is planning for your assets after you die. Since many crypto assets are stored in wallets with private keys for security, these funds could be lost forever if there is no plan in place. So, Take action and create a plan for your assets, regardless of your age. This advice applies not only to cryptocurrency but also to traditional assets. Wealthy individuals with over $10 million in crypto assets should update their estate plans every six months. Since blockchain assets are frequently moved, it’s crucial to keep the estate plans up to date to reflect these changes. Unlike bank accounts or other assets that can be easily transferred to your heirs after your death, cryptocurrencies require careful planning and preparation to ensure that they are not lost or inaccessible as Crypto Inheritance. In this article, we will explain what happens to your crypto when you die, why you need to plan ahead, and how you can pass on your crypto assets to your loved ones.

What Are the Consequences of Dying without Provisions for Crypto Assets?

Crypto Inheritance

While you’re alive, you may strive to maximize your crypto assets by building a diversified Crypto Portfolio and employing strategies such as Crypto Copy Trading. By becoming knowledgeable about the optimal timing for cryptocurrency investments, you might have accumulated a significant amount of crypto in your wallets. However, if you pass away without providing instructions or making provisions for your crypto assets, there is a high probability that they will be permanently lost. This is because no one else will be able to access your private key or your digital wallet unless you have shared it with someone you trust. Even if your heirs know that you own crypto assets, they will not be able to claim them without the necessary information and tools.

According to a study by Coincover, an estimated 4 million bitcoins (worth about $180 billion at the time of writing) are out of circulation due to lost or forgotten keys. Some of these bitcoins belong to people who have died without leaving any clues or backups for their crypto assets. For example, in 2018, the founder and CEO of QuadrigaCX, a Canadian cryptocurrency exchange, died unexpectedly while traveling in India. He was the only person who had access to the exchange’s cold wallets, which contained about $190 million worth of cryptocurrencies belonging to thousands of customers. Despite extensive efforts by his widow and the court-appointed monitor, the keys have not been recovered.

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The problem of crypto inheritance is not only a financial loss for the individual owners and their families but also a social loss for the whole crypto community. As more and more crypto assets are locked up or lost due to death or other reasons, the supply of cryptocurrencies will decrease, which may affect their price and utility. Moreover, the lack of proper planning and awareness may discourage potential users from adopting cryptocurrencies, as they may perceive them as too risky or complicated.

What Is Crypto Inheritance?

Crypto inheritance refers to the process of passing on cryptocurrency assets to beneficiaries or heirs upon the death of the owner. Cryptocurrencies, such as Bitcoin or Ethereum, are digital assets that exist on decentralized networks and are secured through cryptographic technology.

In traditional inheritance, assets like money, property, or stocks are typically transferred through legal mechanisms like wills, trusts, or beneficiary designations. However, cryptocurrencies pose unique challenges for inheritance due to their decentralized and pseudonymous nature.

What Steps Can Be Taken to Plan Crypto Inheritance?

Crypto Inheritance

There are several steps that you can take to plan your crypto inheritance, such as:

1. Make an inventory of your crypto assets 

Make an inventory of your crypto assets 

You should list all the cryptocurrencies that you own, as well as the platforms or services that you use to store or manage them. You should also include the current value and location of each asset, as well as any relevant information or instructions for accessing them.

2. Choose your beneficiaries and trustees. 

Choose your beneficiaries and trustees

You should decide who will inherit your crypto assets and who will execute your wishes. You can name one or more beneficiaries for each asset or create a general pool of beneficiaries for all your assets. You can also name one or more trustees who will be responsible for transferring your assets to your beneficiaries according to your instructions. You should choose people who are trustworthy, competent, and familiar with cryptocurrencies.

3. Write a will or a trust. 

Write a will or a trust

You should create a legal document that specifies how you want your crypto assets to be distributed after your death. You can use a will or a trust, depending on your preferences and circumstances. A will is a document that expresses your wishes and appoints an executor who will carry them out. A trust is a legal entity that holds and manages your assets for the benefit of your beneficiaries and appoints a trustee who will oversee them. Both options have their pros and cons, so you should consult a lawyer who specializes in estate planning and cryptocurrencies before making a decision.

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4. Store your keys and documents safely. 

Store your keys and documents safely

You should store your private keys and recovery phrases in a secure and accessible location, such as a hardware wallet, a safe deposit box, or a fireproof safe. You should also store copies of your will or trust, as well as any other documents or information that may be needed by your beneficiaries or trustees, such as passwords, PINs, seed phrases, addresses, etc. You should also inform your beneficiaries or trustees about the location and contents of these items but do not share them with anyone else unless necessary.

5. Update your plan regularly. 

Update your plan regularly

You should review and update your plan regularly, especially if there are any changes in your personal or financial situation, such as marriage, divorce, birth, death, etc. You should also monitor the value and performance of your crypto assets, as well as the developments and innovations in the crypto space, and adjust your plan accordingly.

What Tools and Services Are Available for Crypto Inheritance Planning?

As cryptocurrencies become more mainstream and widely adopted, the need for crypto inheritance planning will also increase. Fortunately, many tools and services can help you with this process, such as:

  1. Crypto inheritance platforms. These are platforms that offer various solutions for crypto inheritance, such as creating and executing smart contracts, generating and storing keys, encrypting and sharing data, etc. Some examples of these platforms are Safe Haven, Casa Covenant, TrustVerse, and Digipulse.
  1. Crypto inheritance lawyers. These are lawyers who specialize in estate planning and cryptocurrencies and can help you create a legal and compliant plan for your crypto assets. They can also advise you on the best practices and strategies for crypto inheritance, as well as represent you in case of any disputes or challenges. Some examples of these lawyers are Pamela Morgan, Matthew McClintock, and Ross Bruch.
  1. Crypto inheritance education. These are educational resources that provide information and guidance on crypto inheritance, such as books, articles, podcasts, webinars, courses, etc. They can help you learn more about the basics and benefits of crypto inheritance, as well as the best practices and tips for planning your crypto legacy. Some examples of these resources are Crypto Asset Inheritance Planning by Pamela Morgan, What Happens to Your Crypto When You Die? by CoinDesk, and The Crypto Inheritance Podcast by Matthew McClintock.

Crypto inheritance is a new and important aspect of crypto ownership that should not be overlooked or ignored. By planning, you can ensure that your crypto assets are not lost or inaccessible after your death but instead are transferred to your loved ones according to your wishes. By doing so, you can also contribute to the growth and sustainability of the crypto community and economy.

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Conclusion

In conclusion, crypto inheritance planning is crucial in ensuring the smooth transfer of your crypto assets to your beneficiaries after your passing. Failing to make provisions for your crypto assets can result in permanent loss or inaccessibility, leaving your loved ones without the ability to claim what is rightfully theirs. By taking proactive steps, such as creating an inventory of your assets, choosing beneficiaries and trustees, writing a will or trust, securely storing your keys and documents, and regularly updating your plan, you can safeguard your crypto assets and provide clarity for your heirs.

To stay informed about the latest news, trends, and tutorials related to cryptocurrencies, NFTs, and the metaverse, I encourage you to subscribe to our website newsletter. By subscribing, you will receive timely updates directly to your inbox, ensuring that you stay ahead in this rapidly evolving landscape.

FAQ

Why do I need to plan my crypto inheritance?

You need to plan your crypto inheritance because cryptocurrencies are secured by private keys that only you can access. If you die without leaving any instructions or provisions for your crypto assets, they will most likely be lost forever.

What are the benefits of crypto inheritance?

Crypto inheritance offers several benefits, such as avoiding losing your crypto assets, ensuring that your legacy lives on, and contributing to the growth and sustainability of the crypto community and economy.

What are the risks of crypto inheritance?

Crypto inheritance also involves some risks, such as scalability, regulation, competition, and education. These factors may affect the functionality or availability of your crypto assets or services, as well as the legal or compliance issues that may arise from them.

What are the types of crypto inheritance documents?

The types of crypto inheritance documents are wills and trusts. A will is a document that expresses your wishes and appoints an executor who will carry them out. A trust is a legal entity that holds and manages your assets for the benefit of your beneficiaries and appoints a trustee who will oversee them.

What are the pros and cons of wills and trusts?

Wills and trusts have their pros and cons, depending on your preferences and circumstances. Wills are simpler and cheaper to create, but they are subject to probate, which is a public and costly process that may delay or dispute the distribution of your assets. Trusts are more complex and expensive to create, but they avoid probate, which is a private and efficient process that ensures the timely and accurate distribution of your assets.

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