If you were to die now, can your beneficiaries access your digital wallet ?-Part 1

There are two things that we all have in common HERE: (1) we both own a fraction of crypto investment and (2) we are both going to die someday and leave our crypto investments behind. We probably vary on the third issue, which involves (3) planning on what will happen to our crypto when our time on earth expires.

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If you are to pass on, your loved ones will not be able to access your crypto wallet unless you give them access to your keys during your lifetime. But that also can compromise your security if you give them when you are still alive, yet the plan is to have them inherit instead and not turn your digital wallet into a joint account.

If you pass away without documenting your password and crypto keys — your investment may remain locked in a digital wallet that can’t be accessed and it is gone forever. Hence due to these reasons, I have been exploring options on how my beneficiaries will be able to access my crypto wallet.

God forbid but if you were to pass away tomorrow, would your family have access to your crypto investment?
If your answer is no then this article is for you and me to brainstorm on possible plans to leave clear instructions for your beneficiaries.

Available options for passing on your crypto

There are two options that one can pass their Crypto to their beneficiaries which are (1) Leaving cryptocurrency in your Will stating the beneficiaries and (2) Providing your executor with access to your public and private keys to be used upon your death.

Both options will require you to name a beneficiary and list your crypto assets including any passwords, PINs, keys and instructions on how to access your wallet. If you have invested in different crypto projects and have an account at a cryptocurrency exchange, make sure you research the protocol that needs to be followed by your beneficiaries.

According to a Coinbase representative, some exchanges have a protocol in place to guide next of kin on how to access the deceased's crypto, and their services also include one-on-one assistance.

Part of their protocol requires a beneficiary to provide a death certificate and power of attorney to initiate a transfer out of a deceased person’s account. This may sound a bit contradictory to what crypto has been perceived to be decentralized. Additionally, there are plans in place for some exchanges to add account beneficiary functionality to their exchange platform.

There is hope and some initiatives to use smart contracts wherein the smart contract will pay out your cryptocurrencies to your beneficiaries once your death is registered on a centralized list of deceased people. Your crypto will be distributed among your nominated beneficiaries in the ratio that you have specified during your lifetime.

What are the general Guidelines for passing on your crypto investments?

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1. Name a beneficiary for your crypto assets in your estate plan

The first step will be to name the person you want to inherit your crypto wallet or assets when you are late. You will need to list all your crypto assets, include a guide on where they’re stored, and how they should be distributed among your beneficiaries if you have more than one.

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2. Name an executor to administer your last will

As much as most of us have advanced in knowledge regarding the crypto ecosystem, our beneficiaries may lack knowledge in operating crypto wallets. Thus, for this reason, you need to identify the person who is capable of protecting and preserving your digital assets or wallet. Ideally, you should select someone familiar with crypto and trustworthy.

The reality is, anyone who gains access to your crypto wallet or keys can use it — for better or for worse. So if you are feeling uneasy to delegate everything to one executor, you can also identify co-executors and state their role clearly so that there isn’t any risk of conspiracy or confusion.

As priorities changes in your life where you may end up getting married or divorced, and having more children, you should practice revisiting your estate plan frequently to ensure all your preferred beneficiaries are covered. You should also ensure that your executor has sufficient knowledge of the crypto market and is in a position to access or transfer your crypto to your beneficiaries when the market is not in deep to avoid making unnecessary losses.

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3. Consider an irrevocable trust

One thing we cannot avoid is the change in laws and regulations that governs our revenue. So If you own large amounts of crypto and are valued above a certain threshold as per your country, they could be subject to tax when you die. Thus, you need to know about the latest federal estate tax exemption for individuals and married couples. You can use a structured irrevocable trust to separate crypto assets from your taxable estate.

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4. Document your crypto storage

You will need to outline proper guidelines on how your crypto is stored and list the crypto exchange account. This information will guide your executor and beneficiaries on where to retrieve your crypto after you die. For some centralized crypto exchanges, your executor or beneficiaries can have the option to contact these exchanges to initiate the transfer of your assets upon providing the required documents such as:

• A death certificate
• A copy of your will if available
• Your proof of identification
• A letter signed by the executor to support your access to the crypto

For this article, we explored ways in which your beneficiary can access our crypto to avoid it being lost in the digital ether forever when you pass on. In part 2 we will brainstorm different ways to safely store crypto public and private keys including a password vault. Part 3 will focus on crypto taxation since in some countries crypto is viewed as capital assets, meaning any fraction you sell or exchange for a gain is eligible for tax.

Do you currently have any plan on how are going to leave your crypto for your beneficiaries? How are you currently storing your crypto wallet or assets and what is your confidence in its security on a scale of 10?

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