What Happens to My Bitcoin When I Die?
A question we have been asked several times is "what happens to my Bitcoin when I die?". While we all hope we will have enough time to pass our belongings on to our loved ones before we go, sometimes unexpected things happen. There are many expenses associated with death (funeral, living expenses for remaining loved ones etc.). Hence, it’s a smart idea to have a plan in place, should the worst happen.
If you are in possession of Bitcoin or other cryptocurrencies when you pass, they may be lost forever if you don’t take the necessary steps beforehand to ensure that your digital assets go to your estate.
Traditionally, gaining access to a bank account is relatively straightforward after a family member passes. However, in the case of Bitcoin, it is much more complicated as there are wallets, passphrases and security boundaries.
The main issue when it comes to wallets is that it’s not recommended to write your passphrases directly in your will due to security risks.
In light of this, there are a few different ways to make sure your cryptocurrency assets get passed on.
How to Pass Crypto on In Your Will
The first step is to let your family or lawyer know that you have crypto stored. If your family isn’t aware of the existence of your crypto holdings, it will be lost forever.
If they are not familiar with the storage of Bitcoin, how private/public keys work etc., it would be good to explain the basics to them.
Keep your wallet passphrase somewhere secure (like a deposit box or a locked safe) and provide instructions on how to get to it in your will. As mentioned above, it’s not recommended to write your mnemonic/backup phrase/private key directly in your will.
If you have multiple ways of storing crypto, make sure you list detailed instructions on how to access each. Most people are not familiar with the technical aspects behind cryptocurrency storage, so make sure your instructions are detailed enough for a layperson to follow.
If you haven't already got a will in place, check out Public Trust. They can help you through the whole process and answer any questions you may have. Alternatively, the Citizens Advice Bureau has a helpful guide covering frequently asked questions on wills in New Zealand.
Use A Paper Wallet
In our post about Paper Wallets, we mentioned how to use “cold storage” methods to physically keep your Bitcoin Wallet secure.
Store your Bitcoin in a paper wallet and put it into a safety deposit box. Let your family members know (and mention it in your will) how to access this safe. There are a few services available in Auckland or Wellington:
Remember to check their insurance policy on covering your digital assets. For an example of price, it can start from approximately $200 a year with Security Deposits Vault.
The other option is to leave it with your solicitor who will execute your will on your passing.
There is a toss-up between whether to store your phrases with a third party (e.g. safety deposit box provider) or in a personal safe. Just keep in mind that if you do decide to keep it at home, there is the possibility of burglary or fire destroying your papers, so prepare accordingly.
Disclaimer: The above references an opinion and is for informational purposes only. Do not take this as personalised financial, legal or investment advice. The opinions expressed by the author do not represent the opinion of BitPrime. Always seek the legal advice of a professional.
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Last updated: 17/12/2018