Here’s what happens to your crypto when you die

One of the most appealing aspects of your crypto wallet is that no one can get into it. However, in case you go away, that advantage becomes a big problem. Dying without clear instructions for what will happen to your cryptocurrency – or how your heirs can even access it – is tantamount to letting it go. Standard methods of transferring your assets are complicated by the privacy factors built into digital currencies. Here’s what to know about what happens to your crypto assets when you die, and what you can do to plan ahead while you’re alive.

What makes transferring digital currencies so complicated

Crypto poses a unique challenge when it comes to estate planning, mainly because of how digital currencies are kept safe: Crypto is stored in a virtual wallet that can only be accessed with a private key (basically a super complex password). This remains true even after you die.

Your crypto will not be treated as money in your bank account. Instead, it is treated as a probate asset (meaning it must go through the legal and court-driven process of distributing your estate). Unlike other assets that you can leave in your estate, crypto exists only in virtual form, and is encrypted. When you die, there is no centralized authority (like a bank) that can help your heirs access your account. The only way to get into the wallet is to have your private key.

Your instinct might be to simply register your private crypto key for your loved ones right in your will – but this means compromising the benefits of encryption. After you die and your will goes through probatethe becomes a public document, so leaving the key in the will is a big risk—your receiver must arrange to move the assets out of the wallet before your key becomes publicly known. OWhen you’re gone, it’s hard to guarantee.

There is also risk when it comes to the old method of writing down the crypto key on a physical piece of paper; a bad actor can find it and get into your wallet while you’re alive too. As Time puts itcrypto estate planning requires striking one, “nice balance between security and accessibility.”

The features that keep digital currencies so secure during your lifetime are exactly what make them inaccessible to your loved ones after your death. So where does that leave you?

Steps you can take to transfer your crypto assets

Although traditional estate planning presents some difficulties, there are steps you can take now to prepare your loved ones to access your crypto wallet after you die.

1. Name a beneficiary for your crypto assets in your estate plan. As with other physical assets, you need to list who gets what—and where they can find it, and how they can access it.

2. Thoroughly document where your cryptograph is stored. Whether your assets are stored in a custodial account on a crypto exchange or can be found offline in a cold wallet, recipients need to know where to find your assets.

Here are some best practices according to Kiplinger:

• Document the location of the wallet itself (ideally kept in a fireproof safe or safe).
• Document your private and public keys for each wallet you own. Both are required to access your crypto. Keep both keys in safe but separate places.
• Document any other information that may be required to access your wallet, such as a PIN or recovery phrase.

3. Decide where to document this information. Admittedly, we pointed out the risks of recording your private keys in person or on a piece of paper. But if it is to be any hope that your loved ones will gain access to the digital assets, you must accept some measure of Danger. You may consider including all of this information in your estate plan and leaving it to an attorney, as well as keeping copies of the documents in a physical safe deposit box.

The bottom line

The crypto landscape is constantly changing, and the onus is on you to make sure your heirs can access your crypto after you’re gone. The alternative is that your assets essentially die with you. If you’re hoping to leave digital currencies to your loved ones, you’ll need to create clear instructions to ensure they’re not locked out of your wallet forever.