Cryptocurrency wills 101
By Alex Phenom, founder of Phenom.Team
Bequeathing your cryptocurrency to others after your death isn't as simple as it is for other assets.
The main obstacle that could result in your digital coins being lost forever is the fact that a special private key is required to transfer its ownership. This private key is owned only by the direct users of the digital wallet. If it’s lost, access to the cryptocurrency within the wallet is lost as well.
If cryptocurrency grows in value at the rate which many people expect it to, this could result in a fortune being thrown down the drain.
So, what's the easiest way to give your heirs access to your digital wallet? Your best options are listed below.
Make a traditional will
There are two types of wills: open wills and closed wills.
An open will can be viewed by several people, so this is unlikely to be a secure option you'd want to rely on.
A closed will must be written by hand. A notary and two witnesses are required for its certification, but none of these individuals necessarily have to know the contents of the will. As such, this is your most secure option for bequeathing the contents of your digital wallet in your will. Be aware that non-implementations of these regulations will cause a revocation of the will, lots of stress for those involved in the probate process after your death and the possibility that your funds are bequeathed to individuals other than those stated in the will.
A multi-signature wallet
A multi-signature wallet is a digital wallet owned by multiple people. These wallets contain three private keys. In order to transfer funds, two of the three keys have to be activated.
On one hand, this means that the owner of one key can't make a transaction without the consent of the wallet's co-owners. On the other hand, it means that the transfer of funds is still possible if one private key owner dies.
With this in mind, the owner of a digital wallet could transfer the first key to an heir and the second key to a notary who passes it on the heir after you pass on.
Use an after-death email service
There are now a few online services that allow you to send emails to your loved ones after death.
Of course, these emails will be prepared by you before your death. These are unlocked by trustees after your death. Your private digital key could be stored within these emails.
For the sake of privacy, it's recommended to use this service through your own private hosting, rather than a third-party services. These third-party services are great for sentimental messages, but they may not have the level of security to be trusted with sensitive financial details. Even with private hosting, it's worth using an encryption service and passing the decryption key to your heirs in advance. This decreases the chance of cyber-criminals getting hold of your cryptocurrency.
Make a plan for bequeathing your cryptocurrency today
As with the preparation of a traditional will, a plan for bequeathing your cryptocurrency tends to the fall to the bottom of investors’ to-do lists. Nobody likes to believe they need to make urgent plans to ensure their inheritance reaches their heirs.
Nevertheless, as a growing number of people invest in cryptocurrency, the processes described above will ultimately become a common part of the wills and probate process. The safest course of action for you and your loved ones is to choose an option and arrange it as soon as possible.
Alex Phenom is a blockchain enthusiast and founder of Phenom.Team - the fast growing technology company with more than 20 members on board. In Phenom, Alex leads the research and development in the area of blockchain technology. Under his guidance Phenom.Team became a winner of two blockchain hackathons, developed more than 10 blockchain solutions and DAPPs.
Image via Istock.com.