There is no limit to the amount of wealth one can accumulate in a lifetime, and there is equally no limit to the amount of wealth that can be lost to death. This is especially true if proper plans are not put in place early enough.
Death can occur without warning, which is one of the other reasons why banks and other institutions ask people to include ‘Next of Kin’ in certain account opening forms.
Life is as fragile as it is unpredictable, and a death could mean the loss of a fortune if not claimed by another. Notably, a deceased person’s personal assets, investments, or properties are sometimes written off to the corporation if there is no one to make a claim.
Various methods can be employed to prevent this, such as estate planning to preserve or ensure property is passed on to loved ones. Estate planning is essentially putting in place a solid structure for the management and disposal of one’s property, revenue streams, and other responsibilities during life in the event the individual becomes incapacitated or dies.
However, in the context of crypto estate planning, people create a plan that specifically spells out what happens to their crypto asset holdings. Before we learn more, let’s understand the fundamentals of crypto estate planning.
Tìm hiểu về quy hoạch bất động sản Crypto
Estate planning has been in existence long before the advent of digital currencies. If anything, cryptocurrency has broadened the scope of estate planning while adding more complexities than we had years ago.
There is a popular adage in the crypto space that goes “not my key, not my coin.” This suggests that anyone not possessing a private key to a cryptocurrency cannot access the digital asset thereof. Typically, before estate planning started accommodating cryptocurrency, crypto holders tended to lose it all if something unfortunate occurred.
Relatives, family and friends in particular had no help desk to call when their loved one was incapacitated or passed away. In most cases, if a person with crypto holdings fails to set up a succession plan ahead of an unforeseen event, such as death, then the chances are that the digital asset remains locked forever with no one able to access it.
However, people can now avoid the above scenario by leveraging crypto estate planning. This is similar to traditional estate planning in many respects. In simple terms, crypto estate planning entails the process of developing a plan that specifies what happens to your crypto assets in the event of your death or disability. You can also think of it as a last will and testament.
Quy hoạch bất động sản Crypto hoạt động như thế nào?
There are several ways to go about crypto estate planning. Notably, some people opt for do-it-yourself (DIY) methods, while others seek the help of professionals. But the primary objective is the same – to ensure the proper handing over of digital assets after death.
There are four key elements to consider when setting up a crypto estate plan, outlined as follows.
1. Designation of at least one beneficiary. In any estate planning, including that of crypto, a planner must identify at least one person as the sole beneficiary. In the case of multiple people, co-beneficiaries will inherit the digital assets. This is a very important step, as it eliminates potential crises that may result from unspecified beneficiaries.
2. Thứ hai, một cái nhìn tổng quan hoặc phân tích về tài sản kỹ thuật số của bạn nắm giữ, nơi mà người thụ hưởng phải được nêu ra. Có một chỉ định ở đây là không đủ. Điều quan trọng là phải nêu cụ thể ai nhận được những gì và số tiền hoặc tỷ lệ phần trăm được nhận bởi mỗi người thụ hưởng.
3. Clear instructions on how to access locked digital assets must be provided. Owing to the complex nature of digital assets and their security, it is important to give directions on how to access them. An estate owner must avail of passwords, two-authentication factors, PINs, and other login information.
4. Lastly, a selection of trusted and reliable third-party administrators must be conducted. Unless a person opts for DIY methods, it is very important for an estate owner to employ a third-party professional specialized in estate planning. They can implement the entire management and handling of digital assets upon the owner’s demise.
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By establishing these four key elements, an estate owner can rest assured that their digital asset holding is successfully passed on to the rightful beneficiary even when they are no longer around to do it themselves.
That being said, various concerns may arise during or after crypto estate planning. Estate owners may be concerned that their digital assets could fall into the wrong hands if handed over to an untrustworthy administrator.
To address this, estate owners opt for licensed and regulated platforms while collaborating with more reliable alternatives to traditional estate planners. These individuals are commonly known as ‘digital executors,’ a relatively new and uncommon practice among estate planners. So, what do they do?
Digital Will Executor: What Does it Mean and Why do You Need One?
A digital will executor is the person you name in your will to manage your digital assets upon demise. Like a will executor, a digital will executor specializes in managing digital properties. These include crypto assets, digital photos/movies, music files, digital documents, online accounts, etc.
Depending on the website being used, an estate owner can easily nominate digital will executors. They will oversee, manage, and ultimately ensure that a crypto estate plan is correctly distributed.
Furthermore, an estate owner can limit what the estate planner can access while they are alive. They can, for example, indicate in their will which assets and accounts their digital executor controls. This also implies that they are not obligated to grant unrestricted access to all digital properties if they are unwilling to.
How to Nominate a Digital Executor
Numerous websites offer crypto estate planning and management services. Popular ones include Fidelity, Anthony Spark, Plancorp, Freewill, Litewill, and so on.
Generally, to nominate a digital executor across any of these platforms, an estate owner must first make a list of all their digital assets. This includes online passwords, which makes the process easier for their digital executor.
Once that is sorted, the next step is to store the list securely and tell the digital executor how to access it. Industry experts strongly advise to make at least two copies of asset records and store them in separate locations. Moreso, these lists may require frequent updating, especially for active and high-profile crypto investors.
If using a website, you can choose from a pool of executors provided or affiliated with the chosen platform.
Regardless, an estate owner can generally name a digital executor in their last will and testament. If an estate owner deals with a complex estate, it is advisable to seek the assistance of an attorney who also functions as a digital executor. They could confirm if crypto estate planning law is recognized in a given location.
On the Flipside
- It is critical to note that cryptocurrency presents their own challenges regarding estate planning. Unlike traditional investments, which can be traced back to savings accounts and documents, cryptocurrencies are quite difficult to track down.
- Even if you leave a crypto estate plan, they often do not include a complete inventory of all your digital possessions. That is why it is important to exercise extreme caution when executing a crypto estate plan.
Why You Should Care
Cryptocurrency is relatively new to the global economy and thus introduces new opportunities and challenges. Crypto, being an advanced asset class, is relatively complex. Its ownership transfer, especially in unforeseen circumstances, is more stringent compared to traditional fiat currency. Hence the need for crypto estate planning.
Read more about the concept of bankruptcy in a crypto economy:
What Happens If A Crypto Exchange Declares Bankruptcy?
Find out more about seed phrases:
What Is a Seed Phrase and Why Do Crypto Investors Care?
