What Happens to Cryptocurrencies After Death?
What exactly is cryptocurrency?
Though we’ve been hearing this buzzword for the past few years, some of us have not exactly learned what cryptocurrency exactly is. Essentially, cryptocurrency is a type of digital currency. It is secured through the process of cryptography, which makes the currency impossible to “counterfeit” or imitate.
One major feature of cryptocurrency is that they are decentralized. Thus, they are not regulated by a centralized authority, such as a bank or government.
Is it considered an asset?
Cryptocurrency is considered an asset. Therefore, if you possess the digital currency, you need to include it in your estate plan. Like any other asset, it should be included in your last Will and testament so that your executor can distribute it accordingly.
Because it is digital and protected by cryptography, it is one of the more difficult assets to access. If the executor and beneficiaries are unable to find it, cryptocurrency can be lost forever.
To ensure your loved ones have access to your cryptocurrency after death, make sure to name your beneficiary(s) and add a document to your estate plan on how to access the asset.
How do you access cryptocurrency?
When using any storage method, you need to know both the public key and private key of your cryptocurrency. The public key is similar to a bank account number, whereas your private key is like an ATM pin code. The presence of both keys, especially the latter, needs to be known in your Will or in a document within your estate plan.
The private key for cryptocurrencies is often a long string of randomly generated numbers and letters. A private key for a Bitcoin, for example, is a 64 digit passcode (you can view an example here). Therefore, having a document, whether it be a screenshot or a copy of the private key, with the exact order of these characters is essential for gaining access. Even if your beneficiaries know what storage method you used, accessing your cryptocurrency without the private key will be impossible.
To store cryptocurrency, you might be using either a hot wallet (a digital wallet that is always on internet connection) or a cold wallet (a digital or physical storage device that works offline). Both are effective storage methods to keep your currency safe. If you’re using either of these methods, you do not need to provide any additional documents (e.g., a death certificate) to access the account. As long as you know both keys, anybody can access your wallet, but you do need to know the location of the wallet. You can document this information by putting it in your Will.
Cryptocurrency exchanges are also another medium for crypto storage, but are most often used for trading and selling (like any other exchange market). They can act as an extra layer of protection because they keep a copy of the private key. Your executor or beneficiaries can contact them to gain access. However, you can only access the key and your loved one’s cryptocurrency by fulfilling certain requirements.
Coinbase, for instance, requires you to provide several documents, such as a death certificate and probate documents (as well as other documents listed here). Gemini, another popular cryptocurrency exchange, also requires a death certificate and a power of attorney. Other cryptocurrency exchanges, such as Kraken and Crypto.com, usually require the same documents and can provide you with customer support as well.
Most cryptocurrency exchanges at the moment do not have the ability for you to name a beneficiary on your account. You also want to ensure that your executor has the technical capabilities to access your cryptocurrency. This process of accessing is already tedious and specific, so it’s important that you assign an executor familiar with digital currency.
One remaining alternative for storage is creating a Trust. This method can be easier since it keeps your cryptocurrency private and doesn’t require any probate documents. In case you do not want to include the keys in your Trust document (it is recommended that you don’t), you can create a separate document with detailed instructions on how your Trustee can access the cryptocurrency.
Overall, having a plan is the most important element in making sure your cryptocurrency wishes after your death happen. Let Peacefully be your guide in creating a document with clear, detailed instructions on how to access your cryptocurrency. An estate lawyer can also help you determine how to properly handle cryptocurrency assets after death.
Article by Sena Oguzman