We should treat these assets like any other in inheritance, but considering certain nuances
As a relatively new asset class, Bitcoin and cryptocurrencies present a number of issues that holders of digital token wealth have barely considered. The security around the keys of the wallets or what happens to the cryptographic currencies when their owners die are matters on which there is gradually more clarity, and guides are established that advise the holders how to act at the time, for example, to write a will.
The holdings in Bitcoins or other digital currencies of any investor do not have any physical equivalence but are stored in digital wallets. These are online tools -hosted on the computer or in third-party services-, or physical tools -in USB format-, used to store, access, send and receive cryptocurrencies, with public and private keys that allow all kinds of operations.
The ownership of cryptocurrencies is established, in addition to these keys, with addresses and digital signatures created cryptographically and, therefore, are extremely safe. In total, they constitute a set of alphanumeric characters, which many investors memorize or keep in safes, with the consequent risk of temporary or complete loss in the event of death without having bequeathed them, like any other possession.
Many experts advise going to custodians to solve all these problems around the security of our assets. “Since the days of the Wild West, when you had gold at home, there had not been a situation where wealth was stored in private homes as is the case with Bitcoin,” Eneko Knörr, one of the founders of Onyze, recently remarked, during the Trading and Crypto Master Summit.
This anomaly in the eyes of traditional investors is widely defended by the purists of the crypto community; after all, crypto-anarchism is the paradigm of the world without intermediaries. However, the stories of violent robberies to extract the keys through torture, as Tuenti’s founder, Zaryn Dentzel suffered in November last year, or the loss of fortune due to death without first leaving the passwords to access cryptocurrencies, show that “we are moving towards a world in which it is better for someone to keep our coins”, reflected Knörr.
Six Steps to Protect Bitcoins beyond Passing Away
Given the revaluation projections that experts give to Bitcoin, of up to 1 million dollars, “even a small amount can become great wealth,” says Grant Wasylik, an analyst at Palm Beach Research Group. Therefore, “patrimonial planning is important”, explains the expert. Additionally, consulted jurists highlight the need to treat cryptographic assets like any other asset in an inheritance.
Therefore, Wasylik offers six steps to estate planning “to ensure that the discovery, ownership, and access process is not a dead-end for heirs.”
- Make a will. “Clearly establishing how to distribute assets and properties is the easiest way to ensure that nothing is lost,” says the Palm Beach Research Group expert.
- Consider creating a trust or limited liability company. “This can shield crypto assets from estate taxes and other financial liabilities, leaving more to heirs,” Wasylik clarifies. In the case of having cold wallets not listed in the will or trust, it is advisable to have a document with instructions to find and access them.
- Choose executors or trustees who understand cryptography. “Since ‘crypto’ is different from cash, it is best to choose someone who understands how it is traded and held,” the analyst argues. This may require having a separate crypto enforcer or crypto trustee.
- Register and secure crypto wallet details. While it is often best to avoid writing down passphrases and passwords, “having physical copies of credentials is something to consider,” he says. You can keep the paper copy in a secure filing cabinet, safe deposit box, or some other offline location.
- “Knowing the limits of cryptocurrency accounts is essential,” Wasylik says. For example, most cryptocurrency custodians only allow individual accounts without (transfer on death). However, as the cryptocurrency market grows, more options will become available.
- Lastly, the Palm Beach Research Group analyst recommends keeping an up-to-date succession plan. “You should include any major life changes, such as weddings, divorces, births, adoptions, new accounts, new passwords, etc.” “Being aware of these things will lessen the burden on your loved ones,” he concludes.
By Audy Castaneda
