Planning Ahead: What Happens to Your Cryptocurrency When You Die?

Planning Ahead: What Happens to Your Cryptocurrency When You Die?

The new year presents new estate planning challenges. Each decade introduces more assets that you need to monitor and include in your estate planning documents. One of the more recently popular assets is cryptocurrency or crypto. If you’ve ever dabbled in the world of cryptocurrency, you’ve likely noticed that a small $100 investment has the potential to grow into an exponential asset. Sometimes in the span of a few hours! Like any asset, crypto requires succession planning in the event you pass away. The following are some important steps to take when planning your crypto distribution.

Storing Your Crypto: Hot vs. Cold Wallets

One of the first questions your estate planning attorney will likely ask you is regarding how your crypto assets are stored. There are two digital storage methods you can use to house your crypto: Hot Wallets and Cold Wallets.

  • Hot Wallet. If your crypto is constantly moving and you are engaged in selling, buying, and trading crypto, you likely have your currency stored in a hot wallet. These storage mechanisms are relatively convenient, as well as free. However, they always need to be connected to the internet, so they are less secure than their cold counterpart.
  • Cold Wallet. Think of this as a savings account for your crypto. It is a more secure method of storing your crypto long-term.

Anyone who has the password to either of these wallets has unlimited access to your crypto. And, like any physical asset, once it’s gone, it’s gone.

Security, Security, Security: The Most Important Aspect of Crypto and Estate Planning

The main balancing act when it comes to crypto security is determining with whom you share your keys to the safe. If you’re wondering why you need to share this information with anyone, it’s because if you don’t and you pass away, access to your crypto can be lost forever.

Crypto and Insurance

Securing cryptocurrency is a lot like securing a valuable item…that is uninsured. Because cryptocurrencies are unregulated by the government, there are no rules for insuring these assets. This means that security should be your number one priority when dealing with crypto.

Tips to Safeguard Your Cryptocurrency

While crypto is still a new resource and security measures are constantly evolving, there are a few things you can do to increase the security of your assets.

  1. Use Your Cold Wallet. This one’s so important it’s worth mentioning twice. Cold wallets don’t connect to the internet, so they are not vulnerable to cyberattacks.
  2. Personal Device Security. Update your personal device frequently with virus defense software.
  3. Always Use Secure Internet. Only use a secure internet connection when making crypto transactions. You can use a VPN for additional security.
  4. Change Your Password. Get into the habit of regularly changing your password and pin information.

How to Pass On Your Crypto

Since crypto accounts are not traditional investments, they require diligent effort to ensure you have a detailed, secure estate plan for your loved ones.

  1. Name Your Beneficiary. The first step is to identify your crypto beneficiary in the estate plan that lists your crypto assets, passwords, keys, and instructions to find your cold wallet.
  2. Identify the Process for Your Next of Kin. There is a process that can guide the next of kin as they navigate your crypto. Identify which assistance they can use and the materials required to unlock your crypto. Organizations often require a death certificate and power of attorney to initiate a crypto transfer.
  3. Keep Your Plan and Wallet Updated. Like any estate plan, revisit your crypto documents regularly to make sure all of the information is up to date and your assets are going to your selected people.

Schedule a Consultation with the Law Office of Edward J. McCloskey

Edward J. McCloskey has been helping Louisiana residents with their estate planning for over 45 years. He knows that it is never easy to get the ball rolling, which is why he and his team will lead you step-by-step through all of your important decisions and documents. Call the Law Office of Edward J. McCloskey for a Consultation! 504-267-3122