5 Steps to Secure the Future for Your Loved Ones
Cryptocurrency has become an increasingly popular investment option for many people in recent years.
If you have invested in cryptocurrency, it is important to plan for the future and consider how your loved ones can inherit your cryptocurrency in case of your unexpected death.
After all, what is the point of striving toward wealth or financial independence if all that effort is wasted once you pass away?
It is time to be a pro and plan toward making sure that your loved ones inherit your crypto assets.
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How to create a detailed Cryptocurrency Inheritance Plan
These are the basics to create a detailed cryptocurrency inheritance plan:
1 – Document your crypto assets: You may not what you what crypto assets you have and where they are stored, but if you are not there, will your family be able to find and access your crypto assets?
2 – Secure your assets: Leaving behind your crypto assets in a hot wallet installed on your mobile phone or laptop may not be the best idea. A hardware wallet safely stored is a much more secure approach.
3 – Create instructions: 99% of people around you will not be able to access a crypto wallet. Make sure that your loved ones know how to retrieve your crypto assets.
4 – Choose your beneficiaries and the distribution method: If you have a wife and children, you know that your assets will be theirs. But if you don’t, who would you like to be the beneficiaries, and how much should be distributed to each of them?
5 – Communicate your plan to your loved ones: The previous four steps count for little if your loved ones do not know about your plans.
Document your Crypto Assets
The first step in creating a detailed cryptocurrency inheritance plan is to document all of your assets.
This should include a comprehensive list of all of your cryptocurrency holdings, including the name of the cryptocurrency, the amount you hold, and where it is stored.
And you should also include any other assets that you want to pass on to your beneficiaries like, for example, NFTs.
If you are a very active crypto user, you may have many crypto wallets and crypto assets widely distributed.
In this case, to document all your crypto assets may be quite complicated and your loved ones may not even have enough knowledge to figure out how to access them.
Before start documenting your assets, you may consider consolidating your assets to make the inheritance process as straightforward as possible for your heirs.
– One or two hardware wallets with most of your Bitcoin or Ethereum stored on them. If you choose a popular hardware wallet, there will be plenty of posts or videos explaining how to use them. So, even if your heirs are not crypto save, they still can learn by themselves and figure out how to access the crypto assets stored in the hardware wallet.
– One or two hot wallets that you will normally use for frequent transactions. If you choose a popular hot wallet like Metamask, there is plenty of online information explaining how to restore a Metamask wallet from a seed phrase.
Additionally, you may also need to consider the best way to document your crypto assets that does not compromise you or your assets.
If you document your assets on, for example, an Excel sheet store in a USB drive or a piece of paper stored inside a book at home, that information can easily be compromised in case of a hack or robbery.
Encrypted USB Drive
Secure your assets
It is important to make sure that your cryptocurrency assets are secure.
This may involve using a hardware wallet or other secure storage method.
You should also make sure that your beneficiaries have access to the necessary passwords and private keys to access your cryptocurrency.
Trezor hardware wallet
Ledger hardware wallet
Create detailed instructions for your beneficiaries on how to access your cryptocurrency after your death.
This should include information on how to access your hardware wallet, how to transfer the assets, and any other important details that they need to know.
Of course, any written instructions must be safely kept from intruders or accidents.
Keeping plainly written instruction stored in a drawer may not be the best option.
So you need to consider some other safety aletrnatives.
Home Safe Box
Choose your beneficiaries and the distribution method
If you have a wife and children, you know that your assets will be theirs.
But if you don’t, who would you like to be the beneficiaries, and how much should be distributed to each of them?
When selecting beneficiaries for your crypto assets, it’s crucial to think about not only who should receive them but also the distribution method.
Consider the proportion of your assets that should go to each beneficiary, taking into account their financial needs and your wishes.
This is an important step in ensuring that your assets are distributed according to your wishes, and it may involve legal or estate planning, depending on your jurisdiction.
Communicate your plan to your loved ones
The previous four steps count for little if your loved ones do not know about your plans.
To emphasize this point, it’s essential to stress the importance of open communication.
Even the most well-documented plan is ineffective if your loved ones are unaware of it.
Sit down with your family or designated individuals and explain your crypto asset plan.
Address any questions or concerns they may have and ensure that they are aware of the location of relevant documents, instructions, and keys.
Ongoing communication is also vital, as the crypto space evolves, and your plan may need adjustments over time.
By keeping your loved ones informed, you help them navigate the complex world of crypto assets in your absence.
Cryptocurrency Inheritance From Custodial Wallets
Custodial wallets are cryptocurrency wallets where the private keys are held by a third-party service provider, such as a cryptocurrency exchange.
Inheriting cryptocurrency from custodial wallets can be more complex than inheriting from self-custody wallets, but it is still possible.
Here are some key steps to consider when inheriting cryptocurrency from custodial wallets:
– Determine if the service provider has a plan for inheritance: Very few custodial wallet providers have plans in place for inheritance. Check with your custodial wallet provider to see if they have an inheritance plan and what steps you need to take to set it up. But take note that in the vast majority of cases, to retrieve the funds of a deceased from a custodial wallet, you must have taken steps to ensure that the process is as smooth as possible for your beneficiaries.
For example, you can have a look at the article ‘How do I gain Access to a deceased family member’s Coinbase account‘, which gives you an idea of what a centralized exchange will require from you to access the funds of a deceased family member.
– Collect necessary information: Collect all of the necessary information related to your custodial wallet, including login credentials, account information, and any other relevant details. Make sure that your beneficiaries have access to this information and understand how to access your cryptocurrency assets.
– Keep your plan up-to-date: As with any inheritance plan, it is important to keep your plan up-to-date. Review your plan regularly and make any necessary updates to ensure that it reflects your current wishes and circumstances.
Inheriting cryptocurrency from custodial wallets can be complex, but with careful planning and consideration, it is possible to pass on your assets to your loved ones in a responsible and secure way.
Custodial Crypto Wallets
Cryptocurrency Inheritance From Non-Custodial Wallets
Cryptocurrency inheritance from non-custodial wallets involves passing on your digital assets stored in wallets where you have full control over your private keys and security.
Unlike custodial wallets, which are managed by third-party services, non-custodial wallets provide you with complete ownership and responsibility for your cryptocurrency holdings.
Here’s an explanation of the process for planning and managing cryptocurrency inheritance from non-custodial wallets:
– Understand the Non-Custodial Wallet: Non-custodial wallets, also known as self-custody wallets, include software wallets (e.g., mobile wallets, desktop wallets) and hardware wallets. They store your private keys, which are essential for accessing and controlling your cryptocurrency.
– Create a Comprehensive Inventory: Create a detailed inventory of your non-custodial wallet, or multiple wallets, holdings. Note down the types of cryptocurrencies, the wallet addresses, and any relevant information about your holdings.
– Document Your Seed Phrases and Private Keys Securely: Store your private keys, recovery phrases, and any other access information in a secure and confidential manner. Use physical backups (e.g., hardware wallets, and paper wallets) to reduce the risk of digital theft.
– Inform Your Beneficiaries: It’s essential to inform your chosen beneficiaries about the existence of your non-custodial wallets and the location of your access information. You can do this in person or by including this information in your will.
Non-Custodial Crypto Wallets
Inheritance Tax Planning for Crypto Assets
If you are a seasoned crypto investor, we assume that you know about your crypto tax obligations.
And most probably you know that leaving crypto as an inheritance does mean that your beneficiaries will have to pay taxes on the inherited crypto.
You want to make sure that they understand their crypto tax obligations and do not make mistakes that may put them in trouble with the tax authorities.
After all, inheriting crypto should be a benefit and not a burden.
Crypto Gifts as an Alternative to Crypto Inheritance
As a tip, you may consider gifting your crypto to your loved ones before you pass away.
Depending on where you live, gifting crypto may be tax-free.
Crypto Inheritance FAQ
Yes, you can inherit crypto. Cryptocurrency is an asset and as such it can be legally passed on upon the owner’s death.
Yes, you can put your crypto in a trust. Cryptocurrency is an asset and there are no laws preventing you from transferring your cryptocurrency into a trust.
When you die, your crypto assets are inherited as any other asset. Spouses would be the primary beneficiary, followed by children parents and next of kin.
Yes, you can include cryptocurrency in your traditional will. It’s advisable to mention the type of cryptocurrency, wallet addresses, and instructions for access.
Yes, you can specify specific beneficiaries for your cryptocurrency holdings in your will, ensuring that they receive the assets directly.
Tax laws related to cryptocurrency inheritance vary by jurisdiction. It’s advisable to consult with a tax professional to understand the tax implications in your area.
It’s a good idea to inform your heirs about your cryptocurrency holdings and provide them with basic knowledge on how to access and manage them in case of your passing.
How to keep your Crypto and Digital Assets safe
Your are looking after making sure that your loved ones will inherit the Crypto. You are a smart and caring person.
You may also consider to increase your security and safety knowledge to keep your Crypto safe.
It is essential to both protect your Money and your Crypto so you may be interested in increasing your knowledge and learning about digital safety and how to keep your assets safe.
Wallet private keys
And don’t forget to also learn about digital safety good practices because the more good digital safety practices you follow, the more secure your digital assets will be.
Two-Factor Authentication (2FA)
Strong and unique passwords
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