Cryptocurrency has become a key asset for many people. However, planning for what happens to it after death is often overlooked. Unlike traditional assets, crypto requires special steps for transfer. Without proper planning, your crypto could be lost forever. This article explains how to protect and pass on your crypto after your death.
Challenges in Passing on Crypto After Death
The first problem is availability. Like, wallets, exchanges, and hardware devices are some ways by which crypto is stored. Your family and friends cannot access your crypto if they do not know where it is or do not have the correct private keys. This could lead to the loss of your crypto in a way that is irreversible in the foreseeable future.
Many of the traditional techniques of estate planning do not include crypto. The law is not fully developed with regard to digital assets. Therefore, it is crucial to plan wisely to make sure that you can get to your crypto and pass it on.
How to Transfer Your Crypto After Death
If you want your crypto to go to your heirs, you have to make plans. This brings us to the question of how your crypto can be secured and how it can be transferred. Here are some of the best known techniques.
Physical Solutions
There is no better option than writing your private keys and seed phrases on paper. Take a sheet of paper and jot them down then ensure that the paper is safely stored in a fireproof safe. But this method has its drawbacks. The paper could be lost, stolen or even destroyed through fire outbreaks, floods, hurricanes, and other natural disasters. To minimize the risk make a copy of the document and store it in different location.
Advanced Solutions
Another solution is encrypted email. Another way is to send the private keys or seed phrases to a friend through an encrypted email. But as with any email, the security of the message lies in the hands of the recipient. Besides, the crypto could be lost if the email service ceases to exist or the recipient forgets the encryption key.
A more complex form of the self-destroying switch is a dead man’s switch. This system releases your private keys to a specific person whenever you do not confirm your identity after certain time intervals. This method is good, however, it does not guarantee total effectiveness. You may not be able to verify because you are sick or cannot access the internet.
Another is social recovery. By using this method, several people (guardians) known to you can assist in the recovery of your assets after death. These services can be of conventional type or implemented using blockchain technology. As social recovery is secure, one should choose correct guardians wisely and state their roles properly.
Smart Contract Wallets
Multi-signature arrangements are possible in smart contract wallets on Ethereum. This implies that more than one personnel has to approve the transactions. You can open an inherited wallet for which you and your beneficiaries will be the joint owners. In case you pass on, they will be able to sign and access the wallet using the signatures. This method also makes sure that your crypto is efficiently handed over to the next generation.
How to Incorporate Crypto Assets in Your Will
Crypto assets must be included in your will and that you must have a will in the first place. Your will should determine who will get your crypto, and in what format the recipient can receive it. Add information on where the private keys are kept – in a safe, with a digital vault, or with a third party.
Ensure that your will complies with local laws. Digital wills are not universally recognized, so it’s best to consult with a lawyer familiar with crypto. Clarify whether your beneficiary is only meant to access the crypto or if they can also benefit from the assets.
What Happens to Crypto on Exchanges After Death?
If you have your crypto with a CEX, it may be slightly different to pass it on. In most cases, the exchanges demand for a death certificate, as well as other legal papers such as a will. It may be unlawful to gain the access to this account without proper permission in certain countries.
For this reason, the executor of your estate should liaise with the exchange on his or her own. Submit the required documentations, and follow the instructions of the exchange.
How to Access Private Keys as a Beneficiary
For a beneficiary, getting to the assets of the deceased person in the form of crypto is not easy. If there was no document regarding the access to the private keys of the deceased, it is required to look for the keys in the devices or safes of the person. If the keys are encrypted or password protected then it could be even more difficult to recover the lost data.
The biggest disadvantage of the crypto is that it could be lost forever if the private keys are lost. That is why, it is important to make sure your own crypto is available to your heirs as well. The following are the measures that can be taken to ensure proper conveyance of information about the keys.
Final Thought
Inheriting crypto after death is also not a very easy thing to do, it requires planning. If you don’t have a strategy in place, your digital currency might disappear or become unreachable. There are ways that you can protect your private keys while also making sure that they are easily available to your heirs. Techniques such as multiple signature wallets, having the coins with a service that will release them per your instructions in the will, would go a long way in ensuring the crypto is passed on in the right manner. It is advisable to seek legal advice to determine the legalities of your plan within your country and start developing your plan now in case of future problems.
