Crypto Inheritance Planning is a specialized subset of general estate planning that addresses the unique challenges of digital assets such as crypto wallets, cryptocurrencies, NFTs, and other blockchain-related assets. As you invest more in these assets, planning for what happens to them over time becomes just as important as planning for your traditional assets.
Why Cryptographic Inheritance Requires Special Attention
Crypto assets behave differently from traditional financial assets when it comes to inheritance, and they also behave differently from physical assets.
- Traditional financial investments Typically, it involves a beneficiary as part of a financial institution account. The institution processes the distribution of the estate.
- Physical assets They may be located on your property (or in a dock, stable, or airport), and are often registered or insured in your name, leaving a clear “paper trail” of ownership. Your beneficiaries usually know that you own them, and they can easily be found when you eventually pass away. These assets are sold or distributed to your beneficiaries according to your wishes as stated in your will.
- Crypto Assets Generally, it is something that no one else can discover unless you make a special effort to do so. This is why it is so important to make an inventory of your crypto assets and make a redistribution plan as part of your estate plan.
For each asset type, you should consult with a professional to consider the legal and tax implications of transferring asset ownership, if applicable.
When it comes to crypto assets, you also need to consider securing your digital holdings while you’re alive, as well as a secure mechanism for transferring access to your crypto wallet after you die. This is where Vault12 Guard can help.
Legal and Tax Considerations
Cryptocurrency inheritance is subject to many of the same jurisdictional issues that affect traditional inheritance, such as laws regarding wills, probate, and executors. Depending on the jurisdiction, tax and transfer rules may affect how cryptocurrency assets are inherited. This is why it is important to consult with legal, financial, and tax professionals who understand both traditional and cryptocurrency-specific inheritance planning. They can help you navigate these rules and ensure your plan is effective and compliant.
Security before and during inheritance
You probably already know that you need to “stay alert” to protect your cryptocurrency investments while you’re alive. There seems to be danger lurking everywhere! One of the inherent risks of holding cryptocurrencies is that you should never trust anyone or any institution with your seed phrase for your cryptocurrency wallet while you’re alive. Also, privacy is very important because of the many types of threats. You don’t want to let a lot of people know that you own cryptocurrencies.
But how do you keep your seed phrase secret from everyone, while still providing it safely to your beneficiaries after you die? Vault12 Guard solves that problem.
What to Consider in Your Cryptocurrency Estate Planning
When adding digital assets to your estate plan, be sure to follow these steps:
- Contact an inheritance expert: Choose an estate planner or estate planning professional who knows cryptocurrency. They can guide you through:
- Tax implications of transferring digital assets.
- The legal framework governing the inheritance of digital assets, including how trusts and sales of these assets may affect beneficiaries.
- Consider your security and protection needs. Private Key And/or Seed Phrase: This is the gateway to your assets, so keep it safe.
- Consider the need to document your digital assets: When implementing an estate plan, you should create a detailed inventory of all your assets, including all wallets and other blockchain-related holdings. For NFTs, you should ensure that both the wallet and the original media files are backed up.
- Include technically minded beneficiaries. Choose someone you trust to manage the technical aspects of accessing and potentially transferring the assets in your wallet. You may have a simple scenario where you store a few wallet seed phrases (and may not require a particularly advanced technical beneficiary). However, your cryptocurrency holdings may be complex or spread across multiple platforms. Every individual situation is unique.
Crypto estate planning is an essential part of protecting your digital legacy, and it’s better to do it sooner rather than later. Planning now will help you avoid costly mistakes and give you peace of mind knowing your assets will be passed on as intended, conveniently, without risk or confusion.