Published on Investopedia.com
By Nathan Reiff, November 7th, 2024
Cryptocurrency investors go to great lengths to safeguard their holdings. Crypto enthusiasts commonly employ hot and cold wallets, trusted crypto exchange platforms, and complex cryptographic keys to protect digital assets from theft and other dangers. But what happens to those crypto holdings when their owner passes away?
If an individual holding cryptocurrencies dies without a will and without providing instructions on accessing those holdings, the short—and unfortunate—answer is that they are lost forever. By some estimates, about 20% of all Bitcoin tokens are lost and unrecoverable.
KEY TAKEAWAYS
- Ensuring a smooth transfer of your cryptocurrency holdings to your next of kin requires that you make careful plans ahead of your death or incapacitation.
- You should make clear in a will the intended beneficiaries of your crypto holdings to ensure that your heirs receive legal ownership of those assets.
- Provide your beneficiaries with the means of accessing your crypto holdings, such as the identification of any crypto wallets you use, custodial services, private keys, and similar.
- Though many crypto investors are hesitant to use custodial services, many of these companies offer a strong security prospect and a well-defined process for transferring account access to beneficiaries.
If you are a crypto investor, it’s essential to take steps now to guarantee that any of your digital holdings can be safely transferred to your heirs.
The various security measures used to protect crypto holdings can, unfortunately, make it difficult for an investor’s next of kin to gain access. To protect your assets while also ensuring that you have a plan in place for them after you die, take time to include them in your will, designate beneficiaries, communicate clearly with those beneficiaries about what you own and how they can access it, and to secure documentation including wallet addresses and private keys or custodial passcodes.
Nathan Reiff
If you do expect to name a fiduciary, take care to ensure that the individual knows cryptocurrency well and is prepared to navigate volatility and security concerns while they oversee your holdings.
