The Importance of Considering Cryptocurrency During Estate Planning
What Happens to Your Digital Money After You Die?
In simple terms, if you’ve invested in Bitcoin, Ethereum or any of the other available cryptocurrencies, whatever sum of money you’ve amassed could be lost if you were to pass away without providing the means to access your crypto wallet. This happens more often than you might think. A digital forensics firm estimated that nearly four million of the possible 21 million available Bitcoins are considered “lost,” with death, misdirected transaction and carelessness being primary causes.1
Cryptocurrency’s Anonymity Problem
One of the reasons people are drawn to cryptocurrency is it’s completely anonymous, enabling you to make discreet purchases without being taxed. However, if you never tell your heirs you own a crypto account or share the information in an estate plan, this anonymity can do more harm than good, since there will be no way to identify or access the deceased’s wallet. This is in stark contrast to the ease with which more traditional finances are accounted for during the probate process.
How to Safely Store Your Access Information
Whatever private information you use to access your wallet, it’s crucial you document it, safely store it and provide whomever you’re entrusting with your estate access to it. Many cryptocurrencies use a combination of several pieces of access information, such as a private digital key, username, password, security questions and two-factor authentication. Physically record this information or put it on a thumb drive and store it in a safety deposit box for optimal safekeeping.
Consider Purchasing a Hardware Wallet for Added Protection
Purchasing a hardware wallet is one way to ensure your crypto account remains accessible and protected if you were to pass away. A hardware wallet is like the default wallet that’s provided to you when you make an exchange, but because it’s encrypted, it’s only accessible by password. This makes your information safe from hackers for as long as the wallet is in use. Just be sure your estate plan includes how to access your hardware wallet.
New Crypto-Estate Technology
As crypto technology evolves, new methods for managing crypto are taking shape as well. The Tomorrow App, for instance, is a new platform that helps you organize your crypto access and holdings into an investment asset of sorts to be transferred to your living trust when the time comes. While this new technology is impressive, it’s far from a finished product. Many find using traditional estate planning methods minimizes financial stress.
Begin Planning Your Estate Today
Whether your will and trust will include crypto holdings or not, it’s crucial you have your valuable assets and applicable finances accounted for in the event you pass away unexpectedly. The estate planning lawyers at the Law Offices of David L. Carrier have years of experience providing clients with the utmost peace of mind. For more information, call 616-361-8400 or visit our website today.