Unlike physical assets, the process of transferring digital assets like Cryptocurrency after you die is not as well known. Without a private key, Bitcoin is gone forever. In this guide, we discuss what happens to your cryptocurrency when you die, how investors access Bitcoin when they are alive and what you can do to keep your Cryptocurrency safe after you pass away.
How to Access Bitcoin When You're Alive
Open-sourced to the public, Bitcoin uses peer-to-peer technology, which means no one controls it and everyone can access it. As a result, the only way to access the virtual currency is with a private key which is typically a 64-digit passcode. Without it, your digital currency doesn’t exist.
There have been many reports about people who purchased Bitcoin and lost their private keys. Now, some leaders in crypto are urging investors to share their private keys with someone they trust to ensure that their Bitcoin fortune doesn't disappear.
At the moment, there's an estimate of tens of billions in unclaimed crypto assets sitting in banks. The substantial loss occurs because the investor fails to include details of these accounts in their Will or doesn't tell anyone the accounts exist before passing away.
How to Protect Your Cryptocurrency Assets
Like physical assets, it's important to leave clear instructions on how you would like your digital assets handled. Here are three tips to ensure that your digital assets are protected no matter what happens.
1) Include your Digital Assets in Your Will
Your Will should clearly outline how you want your executor to handle and distribute your assets. Then, make sure to inform a trusted family member or the executor of your Will where you've kept the details of your cryptocurrency accounts, including the private keys.
A valid Will is also usually required to hand over the assets and details of an account. If you don’t have a Will, consider starting the process with an online Will kit or reaching out to your lawyer.
2) Consider Using a Digital Wallet
Similar to a banking app, a digital wallet is an app that stores and holds on to your Cryptocurrency. Depending on the wallets features, it may include a death-management process. For example, Coinbase is a secure platform where cryptocurrency investors buy, sell and store digital assets like Bitcoin.
They clearly outline what an executor or family member can do to retrieve the digital assets if the account holder passes away. In addition to a digital wallet, consider holding specific instructions and private keys in a safe deposit box or fireproof safe.
3) Use a Password Manager
Consider using password managers like 1Password, which can store all of your account information, including logins and private keys, and then share the master access password with your executor or store it with your Will.
However, it's important to note that password managers can sometimes prohibit password sharing. If that's the case, the executor of your Will may be required to work with the content provider and provide the necessary documentation (death certificate, obituary, etc.) to access the account.
As we progress through a significant shift to digital assets, cryptocurrency exchanges, digital wallets, social media platforms, and other content providers will start to create transparent death-management processes. These will make it easier to alert people about digital assets before you die and provide easy access instructions.
In the meantime, make sure to update your Will, so it clearly outlines how to handle your digital assets after you pass, update the executor of your Will with clear access instructions and keep passwords up to date in one place. If you don’t have a Will, you can start the process online with Willed.
Disclaimer: The content of this blog is intended to provide a general guide to the subject matter. This blog should not be relied upon as legal, financial, accounting or tax advice.