There are currently over 1,600 different cryptocurrencies in the world. However, Bitcoin is the most popular cryptocurrency at the moment, with approximately 32 million Bitcoin wallets configured and 7.1 million active Bitcoin users.
What happens to your cryptocurrency when you die? We will see what cryptocurrency is, how to include it in your will, and the possible difficulties associated with it. Currently, cryptocurrency and legalization is a hot topic; it can be very difficult to prove who inherits what.
Cryptocurrency at a glance
Cryptocurrencies or "crypto assets," as they are sometimes called, are a type of digital currency that a central bank does not control. Instead, the currency is backed by blockchain technology, a public ledger that cannot be changed.
Some of the more popular forms of cryptocurrency include:
• Bitcoin
• Ethereum
• Litecoins
• Ripple
• Doge
• BNB
Cryptocurrency is stored using a virtual wallet. However, the currency itself is not in the wallet - the wallet contains the digital "keys" needed to access the cryptocurrency. Instead, the currency itself remains in a ledger on the Blockchain.
What is the current legal situation on cryptocurrencies?
There is no concrete legal position on cryptocurrencies and inheritance. But what we certainly do know is that cryptocurrency is similar to ownership in that it can be owned, donated, and inherited.
If a person dies and private keys are lost in a cryptocurrency wallet, the cryptocurrency is essentially lost forever. This is because blockchains are extremely secure, and the whole process is decentralized, so there is no way to restore a private key.
In other words, if a person loses their private key (for example, by throwing away the sheet of paper it is printed on), they will not be able to access the crypto wallet. This is because the private key exists as part of the encryption, although the owner may not be aware of it.
Where should I leave my crypto wallet information?
Your loved ones can prove that they are the beneficiaries of your cryptocurrency wallet if they can provide proof of the death certificate and will. However, this is extremely difficult to achieve as there is no central organization responsible for the portfolio.
Therefore, it is imperative to keep your cryptocurrency wallet details in a safe place and that the beneficiaries know all the info when the time comes.
So, where should you keep your cryptocurrency wallet information? You have several options to choose from.
Types of cryptocurrency wallets
Active wallet: The private key is kept online, although it may be subject to theft.
Banks: Some banks, especially online banks, allow you to buy and sell cryptocurrency from a new bank account. They can also keep wallets and private keys on behalf of clients.
Cold Wallet: The private key is recorded on a piece of paper, stored on a USB key, or even stored on a computer without access to the Internet.
Hosted Wallet: The private key is managed by a third-party service such as Coinbase Custody.
Which path you choose is entirely up to you. For example, some people prefer to keep the information in their paper wallet in a safe place, others prefer to use third-party online services, and still, others store it on hardware.
One of the most important factors to consider when leaving cryptocurrency in place is volatile changes in value.
How do I leave cryptocurrencies in my will?
If you want to leave digital assets to certain people in your will, there are some important steps you need to take to ensure that your wishes are met. First, you will need to write specific instructions on accessing your wallet's private key, any username for your online accounts, and all of your public and private key details.
Many people don't like that once a grant of probate has been obtained, your will becomes a public matter, so you shouldn't give specific details regarding your crypto assets or any other account online. But there are ways to ensure resources are accessible when loved ones need to claim cryptocurrencies.
FOR MORE INFORMATION ON HOW ELLIOT KRAVITZ, ATP. CAN BEST HELP YOU WITH YOUR TAX FILING NEEDS, PLEASE CLICK THE BLUE TAB ON THIS PAGE.
THANKS FOR VISITING.
Elliot Kravitz, ATP