Cryptocurrency and NFTs can hold substantial wealth for a family. However, their decentralized nature provides challenges to securing, transferring, protecting, and gifting that wealth.
Why should I include my cryptocurrency and NFTs in my estate plan?
Save your loved ones from a long legal process. Even if they know all about your crypto assets, ie. which cryptocurrency you own, where your cryptocurrency is stored, what your passphrases are, they still may not be able to access and use your crypto assets due to legal issues.
Blockchain technology is tricky for those who are unfamiliar. A private key is needed to access each of your assets so your beneficiaries need to have that information before entering the blockchain.
Cryptocurrency is decentralized. This means that there is no governing body overseeing the affairs of cryptocurrency and central banks are removed from the equation.
4 Steps to Creating Your Cryptocurrency Estate Plan
- Take stock of all crypto assets. Make a list of all of the different cryptocurrencies and NFTs that you own and where they are located.
- Decide who you want to receive your digital assets. This speaks for itself, name your beneficiary. You must tell them that these cryptocurrencies and NFTs exist and where to find them. Namely, “Is there one type of cryptocurrency or many different ones?”, “Are they in a cold wallet?”, “Are they in an exchange or across multiple exchanges?”, etc. Hence, they know what to look for or expect after your death so that the assets don’t become lost forever.
- Appoint a digital executor. Name someone that you trust to carry out your wishes. For most estate plans this is usually an attorney; it’s best to choose someone that has Web3 knowledge. This step is important because it relieves stress from your loved ones during their time of grieving. There are custodian services like Casa’s Diamond Inheritance Program that you can put in place to help your cryptocurrency recovery custodian take control of your bitcoin in the event of your passing.An old-fashioned option is to create a document that includes all of your digital assets and where to find them along with extremely detailed step-by-by instructions of how to access them, including all of your login information and the location of all of your private keys. Wow, that’s a lot of room for error!
- Make your cryptocurrency estate plan legal and binding. Some states don't acknowledge a digital estate plan, so formalize it by mentioning it in your Will or adding it as a codicil to Will. It is important that your estate plan includes plans for what is expected of beneficiaries to do with the digital assets upon a safe and successful transfer of ownership.
One of the best ways to ensure that no one person takes advantage of your digital assets is to place them in a multisignature wallet. Coindesk defines a multisig wallet (for short) as a “cryptocurrency wallet that requires two or more private keys to sign and send a transaction.” The storage method requires two or more private keys to access the wallet. For example, son can’t spend or withdraw cryptocurrency without daughter’s approval. Thus, it doesn’t put the spending power in only one person’s hands. It holds the beneficiaries accountable in carrying out the benefactor’s wishes.
Best Multisig Hardware Wallets
Ledger Nano X - supports multisig with Electrum or Armory desktop wallets.
Trezor Model T - integrates with the Electrum wallet and verifies the change outputs, which is a sign of higher levels of security.
A private key is a unique series of alphanumeric characters known only to the cryptocurrency owner and used to access cryptocurrency via a digital wallet or hardware wallet. Whoever has the private key can buy, sell and use the digital currency… making it highly susceptible to loss or theft. It is essential that you have these private keys backed up on a recovery seed phrase tool, such as the imKey Secret Box and keep them in a safe place.
No one lives forever so invest time in creating your digital asset estate plan so that your legacy of earning cryptocurrency and obtaining NFTs will live on!