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What Happens to Your Bitcoin After You Die & How to Include Bitcoin in Your Will

What Happens to Your Bitcoin After You Die & How to Include Bitcoin in Your Will

When people plan their wealth in anticipation of their death, it doesn't necessarily mean they want death, but they understand the importance of passing those fortunes to a hand that can inherit them.

People often leave behind common assets to loved ones, including cars, land, jewelry, stocks, property, art, and money. However, as digital currencies have become very popular, people are now adding them to their investment portfolios, creating a need for people to include their cryptocurrency assets in their wills before they die.

Some crypto experts have advised crypto investors to share their crypto private keys and wallet passwords with family or trusted friends to ensure their crypto wealth is not wasted when they die, but we cannot trust people so much.

Almost everyone is familiar with transferring physical assets to family and friends, but transferring digital assets like bitcoin is not that common.

According to a study by Angus Reid in Canada, only one in four people have revealed their crypto account and password to someone else.

How should you keep your account details private? What happens to your crypto assets after you die?

In this article, we'll cover how to include bitcoins and other digital assets in your will and what happens to them posthumously.


Understand how your Crypto is stored.

Just like you keep money in leather wallets, cryptocurrencies are stored in wallets, but not those leather wallets you know. There are two main types of crypto wallets: digital (hot) wallets and physical (cold) wallets.

Digital wallets are not tangible but are managed in an app or website. Physical wallets are tangible and more like a thumb drive than the leather wallets in your back pocket. The type of wallet you use depends on your purpose for cryptocurrency.

Below is a brief explanation of the difference between the two wallets and how best to use them.


Online Wallets (Hot):

Hot wallets are online wallets used to exchange and store cryptocurrencies and, as such, are connected to the internet, which makes them less secure. Moreover, they are convenient and free to use.


Physical Wallets (cold):

Physical wallets are best used to store cryptocurrencies for a long time. You can consider it savings account where you deposit money over a long period. Storing cryptocurrencies in cold wallets is like storing cryptocurrencies in a freezer.

While hot wallets act like checking accounts where money can be moved easily, cold wallets act like crypto savings accounts where money is locked for a long time.

Anyone with the wallet password has full access to the cryptocurrency. It can be a third-party exchange, you, or a hybrid.

Some cryptocurrency experts have advised users to use self-custody or hybrid options, as funds in wallets can be frozen by third-party exchanges or attacked for not verifying keys.


Make your Crypto accessible yet secure.

Finding a balance between securing your crypto and making it accessible can be difficult, but it's not impossible.

A hot wallet is an online wallet that requires a PIN or password to log in, just like cold wallets. In addition to the required password and initial phrase, a cold wallet may be easily lost if the key is lost because it is a small physical device.

A good insurance idea is a safe or a fireproof safe where no external damage can affect the wallet. However, store your key, seed phrase, and PIN in separate places to prevent someone from stumbling across all of the items in one place. If this happens and the wrong people see this information, your Bitcoin or another cryptocurrency will be stolen.

Again, be creative when creating a storage method, but don't make it so complicated that you won't remember what you created.

Some common scenarios are people writing fractions of their keys on different pieces of paper and hiding each piece in different places. While this might sound like a good idea, it's actually bad because losing one of those pieces of paper will lose the key.


Make a clear plan for your loved ones.

You may want to make plans for your loved ones before you die; you can do this by adding them to your will and assigning them a share of the estate.

If you assign your crypto assets to them, you can name them in your will and include a document in your estate plan that shows all of your crypto assets. When writing your will, you must include all passwords, PINs, keys, and clear instructions on locating your cold wallet.

Some cryptocurrency exchanges have facilitated a process to help beneficiaries or family members claim cryptocurrency assets while you are gone.

The beneficiary only has to inform the exchange's customer service of your death.

Exchanges like Coinbase and Gemini have a process for returning assets to the next of kin or beneficiary in the event of death. They will need a death certificate and power of attorney to transfer the crypto assets from the Gemini account of the deceased.


Always keep your plan and wallet up to date.

During our lifetime, we go through different stages of life, and many things, including our status and preferences, also change.

Always strive to update your estate plan so that your assets go to the right people and the right beneficiaries have access to the assets. This is very important when you are going through a life-changing phase like marriage, adoption, or divorce.

Also, don't neglect the maintenance of your cold wallet. This can be done in the form of timely firmware updates, ultimately reducing liability to your loved ones and eliminating any withdrawal that may occur after your death.


Use exchanges that can unlock and transfer your crypto assets with a death certificate

Some crypto exchanges have made it easy for users to inherit crypto by allowing them to name a beneficiary on their crypto account. This allows the designated beneficiary to access your crypto assets after you are gone.

Coinbase, for example, allows the deceased's family to access the deceased's assets with proof of certain documents, such as a death certificate and last will.

However, Coinbase does not directly support this, but with the services of an estate planning attorney, it can be accomplished.


Conclusion

Even though people try to include their physical assets in their wills, sometimes they tend to overlook digital assets, which can be lost forever if not bequeathed to someone.

If you've never considered including your digital assets in your will, now might be a good time to make plans ahead of the unprecedented event of death.


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