After a person dies and it is time to dispose of his or her estate, there are steps to follow. The first is to collect everything. This step is usually simple, even without a will. Physical property can be seen, and banks send statements. However, finding cryptocurrency is another matter, especially if the deceased never mentioned its existence. Therefore, when it comes to estate planning, be prepared to include crypto.
Not Your Grandfather’s Asset Class
Unlike stocks, bonds, and bank accounts, cryptocurrency does not generate a paper trail. Crypto exchanges rarely take a beneficiary designation. If holders want to pass their stash to the next generation, they must inform their heirs. With most asset types, this can be accomplished during life or with a will.
However, when it comes to coins, the latter is easier said than done. Cryptocurrency is controlled by a private key or, in the case of exchanges, a password and authentication data. This is all that is required to transfer or liquidate a balance. Therefore, a holder cannot just leave the instructions in a will. A will is a public document.
How to Leave Cryptocurrency in a Will
To be safe, make sure that your will merely refers heirs to a memorandum held by a fiduciary like a lawyer or financial institution. This memo, which is private, would contain the key or password as well as an explanation of how to access the balance. The more detail, the better, as most folks are still unfamiliar with crypto, wallets, and exchanges.
There are variations on this design. The memo could contain a password to an encrypted document that stores the key. Alternatively, the will could point to a safe deposit box which contains it.
For holders who are opposed to probate, or the official proving of a will, there are options as well. It would be possible to transfer the instructions via trust, which is generally private. One day, we might even see the adoption of self-executing blockchain-based smart contracts for wills, which would execute automatically.
Cryptocurrency Can Just Disappear
Estimates vary, but experts generally agree that millions of Bitcoin have already vanished. Culprits include loss of private keys, theft, and poor estate planning. Fortunately, further tragedy can be averted with minimal preparation. Each of the above methods succeeds in conveying ownership and access details without risking public exposure. So, if you own any BTC or Propy tokens (PRO), be prepared to include crypto in your estate planning.