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Author: LifeLegacy Team

Author: LifeLegacy Team

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Avoid a Generational Mess: Part 2

This is Part Two of a series dedicated to providing clarity about the importance of creating, storing and sharing our end-of-life wishes regarding our property and assets.

Avoid a Generational Mess: Part 1

This is Part One of a series dedicated to providing clarity about the importance of creating, storing and sharing our end-of-life wishes regarding our property and assets.

How To Leave Crypto in a Will

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Cryptocurrency is a relatively new phenomenon, and as such, leaving cryptocurrency in a will for your loved ones is slightly uncharted territory. If you’re one of many people who have purchased Bitcoin or Ethereum (to name just two), you might be wondering how to work it into your estate plan. It’s important to understand that simply gifting bitcoin doesn’t guarantee your beneficiary will receive it: You also need to make sure that any beneficiaries know how and where they can find these cryptocurrencies after receiving them from you.

What is cryptocurrency?

Cryptocurrency is an independent class of digital money built on blockchain technology – a decentralized system that stores financial transaction data that cannot be changed. You can learn more about cryptocurrency and how it works on Bitcoin.org’s site.

The independence and security that come with cryptocurrency have made it exceedingly popular. Although its use is currently limited to internet transactions, most people are investing in it for the future. There is much speculation out there that one day this will become mainstream and thus more valuable than the dollar bill or euro – which would mean having an estate plan with cryptocurrency in mind is even more important.

Unlike traditional money, cryptocurrency has no physical form, and can only be accessed if you hold the private key, typically stored in a digital wallet. Because of its secure nature, gifting bitcoin or an altcoin in an estate plan requires extra steps.

What Happens to Cryptocurrency When You Die?

If you have a cold wallet:

Without a private key, there is no way for someone to access your crypto assets if they are stored in a cold wallet (if you would like to read more about what a cold wallet is, check out our blog on this). That means that if you die without leaving behind instructions for someone to locate and access the private key, your cryptocurrency essentially gets lost in the digital ether. Although the asset remains in your possession, they’ll be completely inaccessible. 

If you have your cryptocurrency in a hot wallet/exchange:

If you have cryptocurrency held in a hot wallet or in an exchange like Coinbase, Binance, Kraken, etc, then there’s a more streamlined approach for beneficiaries to receive it. For many online exchanges, there are procedures in place to transfer cryptocurrency assets to beneficiaries if the owner passes away. Typically these procedures require the beneficiary or executor of the estate to produce a death certificate, show identification, and provide the last will and testament of the individual that passed away – this is why including cryptocurrency in your last will and testament is so incredibly important. Without including it, it may not be possible for your beneficiaries to receive your cryptocurrency assets from your hot wallet held on crypto exchanges (although some exchanges also accept probate documents indicating the beneficiary in place of a last will and testament, but that is a lengthy process). 

Why Adding Cryptocurrency into your Estate Plan Matters

If you want to make certain that your cryptocurrency and any other digital assets will be passed on as part of your estate, including them in a Will is the best way. The same goes for any other type of assets that you own, ranging from stocks to real estate. Otherwise, if you do not include your crypto assets in your estate plan, then your beneficiaries will more than likely than not be able to access the crypto assets!

Companies like LifeLegacy make leaving cryptocurrency in your Will easy and accessible. Through making a Will with LifeLegacy, you can easily leave cryptocurrency held in a hot wallet to any beneficiary you would like, including charities.

How Cryptocurrency Works for Your Beneficiaries in a Will

When you die, your executor will distribute your property and assets to the people named in your Will. However, if leave cryptocurrency in an exchange to a loved one, then you will need to include explicit instructions on what cryptocurrency exchange it is held in and the public key (not the private key) so your loved one can find it. Once your beneficiary has this information, they can then provide your last will and testament, public key, personal identification, death certificate and any other required documents to receive your crypto assets. Please keep in mind that this method will only work if you store your cryptocurrency in hot wallets on major cryptocurrency exchanges. 

What if I have cryptocurrency held on a cold wallet?

If your cryptocurrency is held on a cold wallet, then you will need to create an entirely separate plan outside of your last will and testament on how to access it. The reason behind this is because your last will and testament will be public information in probate – so if you include instructions on how to access your cold wallet with the private key, then it can be easily hacked by anyone. Currently, there is no easy way to leave crypto held in a cold wallet to your loved ones. If you would like to read more about it, see here.

Final Thoughts: 

There are essentially two ways people hold cryptocurrency: in hot wallets and cold wallets. Leaving your loved ones crypto assets in a hot wallet is significantly easier than if your crypto assets are in a cold wallet, however, hot wallets are less secure than cold wallets. Therefore, it’s up to you to decide what works best for you and your estate plan. Here at LifeLegacy, we’ve made it easy to include crypto in your last will and testament if you have your cryptocurrency on a hot wallet on an exchange. In as little as 20 minutes, you can create your own last will and testament and include cryptocurrency assets in it if they are held in a hot wallet. 

 

 

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Avoid a Generational Mess: Part 2

This is Part Two of a series dedicated to providing clarity about the importance of creating, storing and sharing our end-of-life wishes regarding our property and assets.

Avoid a Generational Mess: Part 1

This is Part One of a series dedicated to providing clarity about the importance of creating, storing and sharing our end-of-life wishes regarding our property and assets.

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