Handling cryptocurrency after death presents unique challenges. Unlike traditional assets, you can’t simply recover lost private keys or rely on standard estate planning procedures. Approximately $140 billion worth of Bitcoin, a significant portion of the total supply, may be irretrievable due to inadequate estate planning, according to Chainalysis.
In contrast to the conventional financial system, where leftover funds can be reclaimed from banks or asset managers, passing on cryptocurrency involves complexities related to self-custody. Cryptocurrencies and non-fungible assets can be stored in various places, including hardware wallets, online wallets, or centralized exchanges like Coinbase or Binance.
Given that many people are acquiring cryptocurrency with the intention of passing it on to their children, it’s crucial to consider how to transfer these assets to the next generation of holders.
Start with the will: Just like with traditional assets, beneficiaries of cryptocurrency must be specified in your will. If you want to nominate a guardian to access private keys without inheriting the assets, this must also be clearly stated. However, assigning an attorney as a trustee is not feasible due to legal restrictions.
Keep good records and share information: Educate your family about your cryptocurrency holdings and how to access them, especially if they are stored in a wallet. Avoid storing sensitive information online and consider traditional methods like writing down passwords and storing them securely.
Explore advanced options: Multisig cold wallets, where multiple unique keys are required for access, provide enhanced security. Consider using encrypted email services or social recovery methods to ensure beneficiaries can access the necessary information after your passing.
Plan for the worst-case scenario: In case beneficiaries struggle to locate your assets, ensure they have essential information such as the name of the company where your multisig wallet is set up.
By addressing these considerations and implementing appropriate measures, you can effectively pass on your cryptocurrency assets to your heirs while minimizing the risk of loss or unauthorized access.
