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Crypto Estate Planning: What you need to know?

With cryptocurrency’s rise to prominence, opportunities for generational wealth building are growing exponentially. But what if you don’t have a plan to pass down your crypto. What happens to your crypto when you pass?

How can you ensure your crypto wealth passes down to your loved ones? This article will discuss some of the intricacies of crypto estate planning and what you need to know about bequeathing your crypto assets.

What is Crypto Estate Planning, and Why do you Need it?

Crypto estate planning is the process of creating a plan that declares what happens with your crypto assets upon your death or incapacitation. In many respects, crypto estate planning is similar to traditional estate planning.

A crypto estate plan often is in the form of a last will and testament. Some people opt for Do-it-yourself (DIY) estate planning for crypto, and others enlist the help of professionals. Whichever option you deploy, it’s crucial to have a plan to distribute your digital assets upon passing.

Crypto, by nature, is meant to be decentralized and permissionless. You’re the only person that is supposed to have access to your crypto assets by design. However, when it comes to passing down your wealth, this can pose a problem if no one knows how to access your digital assets.

So what happens to your crypto if you pass away? If you don’t have a plan for heirs to inherit your cryptocurrency, your crypto will sit on a blockchain or digital wallet, rendering it inaccessible.

Four Key Elements to Consider for Your Crypto Estate Plan

  1. Designation of at least one beneficiary — it must be expressly written who you want to inherit your digital assets.
  2. A breakdown of your digital assets, who will receive what assets and the amount or percentage each beneficiary will receive.
  3. How to access your digital assets: A detailed description of the location of your digital assets (e.g., a crypto exchange, hot wallet, cold wallet, etc.) as well as any passwords, PINs, or seed phrase(s) to access your private keys.
  4. Selection of a trusted third party to administer your digital assets precisely as described in the first three steps.

What is a Digital Executor, and Do I Need One?

Although we live in a digital age, having a digital executor is a very new and uncommon practice. A digital executor oversees your digital estate, including crypto, NFTs, and digital identity items such as social media or your email account(s). Essentially, a digital director oversees any kind of asset in a digital format.

Who can act as your Digital Executor? It could be a friend or family member. You can also employ the assistance of an estate planner, tax attorney, CPA, and crypto consultant to act as your digital executor.

It’s possible to have a decentralized service distribute your assets instead of a digital executor. However, with proper estate planning, a third party is required to administer the crypto estate plan precisely as you have outlined. Still, slight gaps with automated solutions may make having a human being oversee the process essential.

Challenges to Crypto Estate Planning

Let’s discuss the challenges in crypto estate planning and what you need to know to ensure you can pass down your crypto.

First, the cryptocurrency industry is a relatively young industry with several unknown factors that may arise in the future. Many variables, like taxation and the future asset class category, could shift.

Third, the technology behind Bitcoin and crypto can be complicated and take a while for the average person to comprehend and adapt. It’s essential to work with someone who understands how to navigate and transfer crypto assets back and forth to ensure that your heirs can gain access to your crypto assets.

Fourth, if you opt for DIY estate planning, a third party must have complete access to all the information required to access your crypto assets. Accessing crypto assets after a person’s death can be arduous if there isn’t a written will identifying who is entitled to the crypto assets on a centralized exchange.

Due to the nature of crypto and its design, most centralized exchanges will not be willing to grant access to a deceased person’s crypto assets without legal documentation. Simply for the fact that crypto is meant to be something where each person has sovereignty over their assets.

One unique feature that makes Abra stand out amongst most exchanges is the designated beneficiary feature, which allows the Abra account holder to assign a beneficiary to their Abra Staking assets.

Conquer Crypto with Abra

We at Abra pride ourselves on being one of the safest, most secure crypto wealth management platforms for private individuals and large institutions. Abra, a trusted name in crypto, has secured billions in crypto loans and is managed by a team of crypto industry experts.

In these uncertain times, our flagship products: Abra Wallet and Abra Borrow a wonderful reprieve from market volatility. Connect with the Institutions team to get started today!

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DISCLAIMER: THIS CONTENT IS FOR GENERAL PURPOSES ONLY. NONE OF THE INFORMATION PROVIDED CONTAINS AND IS INTENDED AS LEGAL AND/OR INVESTMENT ADVICE WITH RESPECT TO THE TOPICS DISCUSSED, INCLUDING, BUT NOT LIMITED TO, LEGALITY OF AND INVESTMENT IN DIGITAL ASSETS.