How does Bitcoin pass on to the next generation after death?

More Financial Advisors and Estate Planners Are Realizing That Moving Crypto Isn’t Easy – Bloomberg

Like many Americans, Sandy Carter has been dabbling in cryptocurrencies. She has accumulated a variety of cryptocurrencies and NFTs that are commonly found on the market, and she even has a Lazy Lion, an illustration of an NFT lion, which itself may be worth at least a few thousand dollars. However, until recently, Carter realized that if one day she died unexpectedly, she had no idea what would happen to the modest but growing cryptocurrency wealth.

“What does it matter how you plan it? Because it’s on the blockchain and it’s immutable?” Carter, a former Amazon executive who recently joined a crypto startup, explained.

Carter is not alone, if you don’t have cryptocurrency, there are definitely people around you who do. About 16 percent of U.S. adults say they have used cryptocurrencies, feeling that these digital assets are now everywhere, from Super Bowl ads to Instagram Stories of Bachelor contestants. Cryptocurrencies are new and exciting, and people want to get an early look at the next big investment trend. This means that things like Web3, NFTs and Decentralized Autonomous Organizations or DAOs are the most important.

But new crypto investors are not necessarily thinking about what will happen to their digital assets if they die suddenly.

This is bad news for many, as there is currently no sure-fire way to ensure that cryptocurrencies are passed on to loved ones. Without a corresponding estate plan, heirs of cryptocurrencies have no access to valuable financial support, nor can those cryptocurrencies be retrieved. But even crypto investors trying to plan ahead, as well as some crypto-conscious tax attorneys and financial advisors, have run into a series of problems. How to Smooth Inheritance Behavior in the Age of Bitcoin – A reminder that even as crypto enters the mainstream, it’s still brand new with no reference to it.

The nature of cryptocurrencies complicates the passing of legacy. Cryptocurrencies are usually stored on the blockchain, a digital ledger formed by a network of computers around the world that records transactions, including the exchange of cryptocurrencies. People typically use public and private keys for these transactions. The public key acts like a bank account number and serves as an address that you can use to send cryptocurrency to others. Private keys work like passwords, consisting of unique, extremely long strings that unlock your cryptocurrency. However, unlike other types of passwords, private keys cannot be recovered once lost or forgotten. This means that without these keys, a loved one who has an inheritance will not be able to obtain it.

“For the most part, we already know — your car, your house, your clothes, etc. — that there are laws to go by,” said Pamela Morgan, an attorney who wrote a guide to crypto asset planning. tell the media. “But with these cryptocurrencies, if you don’t actually have the right to transfer those assets, it doesn’t matter what the law says.”

With no officially sanctioned way to transfer cryptocurrencies, investors are trying to come up with their own somewhat bizarre agreements to guarantee that their heirs will get their digital assets. These plans could involve things ranging from locking their keys in secret safes to hiring professional services to manage their cryptocurrencies for successors. But other cryptocurrency owners are still struggling with what to do, and have yet to find a financial advisor who knows cryptocurrency well or can guide them.

What happens to cryptocurrency after you die?

Technically, nothing will change. Likewise, cryptocurrencies are stored on the blockchain, so there is a permanent record. This means that as long as the blockchain exists, your cryptocurrency will live forever, whether you live or die.

How your loved one is going to use that cryptocurrency is a whole different question, and a lot depends on whether the heirs know the cryptocurrency exists and whether they know how to access it. Some people take a similar approach: write down their private key passphrase on a piece of paper, then keep that piece of paper where the family can find it. Other cryptocurrency holders rely on exchanges like Binance and Coinbase, which allow people to trade and sell cryptocurrencies on the internet. These platforms will hand over control of your crypto assets to someone you designate if you legally prove that you have the right to use them – just like a bank. But some cryptocurrency holders dislike the exchanges, which have been targeted by hackers. Some people also don’t like ceding control to a third party. Binance and Coinbase also currently do not allow account holders to name beneficiaries directly on the platform.

Since none of these approaches are ideal, some have turned to startups that build technology specifically for cryptographic inheritance. These include companies like Safe Haven and Casa, which essentially allow people to lock their encryption keys in layers of other private keys, which can then be dispersed among several different people. While this technique should make inheriting encryption easier, it can also require some complicated procedures.

Rudy Steenhoek, an information manager in the Netherlands, is using a tactic sometimes called death notification. Steenhoek gave his wife a hard drive with a special type of key, and Steenhoek would be notified if she used the key. If he does not respond to the notification within a certain period of time, technicians will assume he is incapacitated or dead, and his wife will automatically have information that can be used to locate his crypto assets. As complicated as it sounds, his wife doesn’t need to convince any banks, not even Safe Haven, the company that provides technology, that she is his rightful heir.

The ultra-rich can afford a formal method and have turned to one of their favorite ways to protect their money, such as trusts and family offices. These people—most of whom either got rich by investing in cryptocurrencies early on or bought cryptocurrencies as part of their broader investment strategy—store their cryptocurrencies in specialized financial institutions, which are almost exclusively Focus on managing the crypto assets of the financial elite. Diogo Mónica, president and co-founder of Anchorage Digital, one of the major companies offering such services, told Recode that hundreds of households have already opted for the solution.

While these methods vary, they are all designed to allow loved ones to successfully inherit these cryptocurrencies. Without these keys, families could find themselves looking for years away from their loved ones’ digital assets alone. All over the internet, people looking for the cryptocurrency of their loved ones can be seen asking for help. Some families have even hired digital forensics researchers to help them find lost funds, in the hope that these forensics officers will find clues as to where their loved ones may have stored key records before they died.

“If you don’t create a copy of that key and put that key in a safe place where people you trust can find it and know what to do with it, the wealth you’ve built up in the crypto world will disappear there ,” Matthew McClintock, an attorney specializing in cryptocurrency estate planning, told the outlet. “It’s just locked and stored at its address, and no one can get to it.”

Because the private key password could not be found, the family was excluded from the huge wealth. A man named Michael Moody was unable to unlock bitcoins belonging to his son Matthew Moody, who was killed in a plane crash in California. Matthew Moody was an early Bitcoin miner, which means his cryptocurrency is worth a lot today. Likewise, lawyers belonging to the estate of the late American businessman Matthew Mellon, who reportedly owned $193 million in a cryptocurrency called XRP, were locked in his crypto assets because they could not find his private keys. In addition, Mellon had stored these private keys on devices scattered across the United States before his death.

This approach doesn’t work for most people, not even for most types of cryptocurrencies, including Bitcoin and Ethereum.

Inheriting the spirit of libertarianism that is challenging cryptocurrencies

In theory, crypto should take people’s wealth into their own hands. Because you control your private keys – and your encryption is backed up on the blockchain – you don’t need to rely on any financial institution for your possessions. You can control your cryptocurrency entirely by yourself, which is why some cryptocurrency investors say they are their own bank, “self-sovereign.”

In this way, the act of inheritance strikes at the very roots of the ethos of crypto libertarianism. If you want to pass on your cryptocurrency, you need to trust someone somewhere with your financial information. If you use an internet-based exchange such as Coinbase to access cryptocurrencies, you have left your keys with Coinbase and you are relying on the company’s employees to hand over your cryptocurrencies when your heirs demand it. It may seem simple enough to leave your private key in your spouse’s lockbox, but you have to trust your spouse to know what to do with it.

Basically, you have to decide all this while you’re alive, how much you care about the security of your cryptocurrency, and how much you care about your family’s use of it after you die.

Striking this balance is not easy, Paul Sibenik, case manager at blockchain forensics firm CipherBlade, told Recode that some people have shared their keys with their families in order to keep their crypto assets safe, only to be slapped in the face. steal these cryptocurrencies. While it might seem like an easy option to put your encryption key information in your will, these documents are sometimes made public during probate, so your encryption key is also at risk of being disclosed. There’s also the fact that many Americans never wrote a will at all.

“Ask anyone with stock on the street: What happens to your stock when you die? They don’t know. They’re not ready,” said Tyrone Ross, a financial advisor and founder of story consulting firm 401STC. “Cryptocurrencies are no exception.”

There is no perfect solution: Without a plan, anyone who owns cryptocurrency could run into the problem of inheriting it. At the same time, the value of cryptocurrencies continues to grow, which means the stakes are only going to get higher. A decade ago, Bitcoin was worth a few hundred dollars; last fall, it reached an all-time high of $68,000. That means even one bitcoin is now enough to pay for expensive medical bills, college tuition, and even a down payment on a house. In fact, cryptocurrencies are extremely valuable. The IRS considers virtual currency to be a property, so if you sell it after you inherit it, you may also owe the government tax money.

People are inheriting cryptocurrencies is just another sign that cryptocurrencies have become a real part of everyday finances. After all, you can now access cryptocurrencies from ATMs, mobile payment apps like Venmo, your credit card company. So many people own cryptocurrencies that these digital assets have even been featured in divorce proceedings multiple times. As encryption has become a big part of life, it will also be part of death.

In many ways, the state of uncertainty about cryptocurrency estate planning is proof that we still don’t know what role cryptocurrencies will ultimately play in our lives. It’s clear that no one lives forever, but cryptocurrencies do. extinguish.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/how-does-bitcoin-pass-on-to-the-next-generation-after-death/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

Like (0)
Donate Buy me a coffee Buy me a coffee
Previous 2022-03-13 09:41
Next 2022-03-13 09:42

Related articles