No one really has an idea of how long digital currencies will last, but it is a fair bet they will probably outlast you. It is not easy to pass one’s digital assets to their loved ones after one’s death. At least it is not as straightforward as passing cash or other properties.
In particular, given that wills are not tailored for confidential information, including one’s private key in the document would be a horrendous idea. According to Gordon Fischer, an estate planning attorney:
“I would strongly advise against anyone putting any information they consider private into their will. Wills, after your death, become court documents and are generally public documents, accessible by anyone.”
A Private Key refers to an almost unchangeable passcode. It is generated when someone creates a new cryptocurrency wallet and should be kept as safe and secure as possible. Unfortunately, there is no given way of regaining this private key for a probable heir, since there is no central authority that monitors those keys. It is quite safe to suggest Bitcoin affords one a unique challenge upon death.
If you depart this life without leaving anyone the private key, your bitcoins practically become beyond reach to anyone. In a similar fashion, if you endow your private key without mention of what it is and how to use it, your bitcoins are likely to be bygone. The brilliance of bitcoin is that the algorithm that creates them intrinsically limits the supply. This means when bitcoins are lost, the remaining ones in circulation become a little more valuable due to scarcity. However, this will not help your loved ones, will it?
How do you make sure your bitcoins are well passed on?
The easiest method is to ensure that your loved ones are aware of your bitcoin account. In addition, you should either entrust them with the private key now; or store the private key in a fitting secure site such as a safety deposit box. You can even reserve the private key on a thumb drive or an old-fashioned piece of paper.
If you become more concerned about security to trust the above methods; plus you have a fortune in cryptocurrency, you have a few alternative methods available to make sure that your potential heirs have access to their inheritance.
This one is interesting. It is possible to set up a “time locked” transition that will happen after a defined number of years in the future. With the assumption that your heirs still have access corresponding receiver address to accept the crypto; they will receive the funds on a defined future date. However, that is a risky move. The transaction will take place whether or not you are alive or dead, on the scheduled transaction date.
In addition, third parties such as Coinbase offers a more traditional alternative method: a vault. This is typically a safety deposit box for your private key. Coinbase offers joint accounts, which ensures your loved ones have an easy transition and access to their digital inheritance.
A clear set of estate plans
Whichever method you choose to adopt, ensure that you have a clear set of estate plans in place. Making your wishes known helps you to circumvent probate; which is a strenuous enough procedure.
The laws on the inheritance of crypto assets can be hazy and depends on the country you live in. It is important to consider consulting an attorney to help come up with your estate plans. Different sites may have different terms and conditions to apply; yet another reason to pursue professional guidance.
Moreover, the Revised Uniform Fiduciary Access to Digital Asset Act (RUFADAA) initiates the rules and regulations regarding digital account freehold. It’s significant to acquaint yourself with the RUFADAA; more importantly, update your wills, trusts, and POAs in conformity so that your fiduciaries gain access to your crypto assets.
Conclusion
Various digital assets, such as your Facebook page, may not have much monetary value. However, digital currencies have a basis and valuation that requires monitoring. Such assets can influence your estate taxes and the amount you pass to potential heirs.
The growing admiration for digital assets will not vanish anytime soon. For fiduciaries, it is significant to take the right insurance; and understand the nuances of such assets in the planning of digital estates.