In this first blog, we’ll dive into the basics of cryptocurrency and how to leave cryptocurrency in a will the right way.
Cryptocurrency is a relatively new phenomenon and as such, leaving cryptocurrency in a Will is somewhat uncharted territory. If you’re one of many Indians who have purchased Bitcoin, Ethereum, Shiba, Doge, MANA etc. and the like, you might be wondering how you should work it into your estate plan.
Why is this a big deal for Indians?
India has the highest number of crypto accounts. There are estimated to be more than 10 crore crypto holders in India. The US came in a distant second in terms of crypto owners at 2.74 crore, followed by Russia (1.74 crore) and Nigeria (1.30 crore).
In comparison, the number of stock investors (Unique Client Codes) registered with the BSE in India has risen from 7 crore in June 2021 to 8 crore at present. Crypto exchanges have seen more growth than stock trading apps. Eg. Zerodha at present has over 7M users against 11 million at CoinSwitch Kuber and 8.3 million at WazirX.
Know that simply gifting bitcoin isn’t effective. You also have to make sure that your beneficiaries will know how to find and access the cryptocurrency you bequeathed to them.
Most millennials and GenX are keen to diversify their portfolio with crypto. This now becomes part of their Estate. Unlike traditional money, cryptocurrency has no physical manifestation. It’s an asset that can only be used in the digital space. For security reasons, cryptocurrency can’t be accessed unless you hold the private key, which is typically stored in a digital wallet.
Family members in general are rarely kept fully abreast of a person’s assets, but this issue is particularly acute for some kinds of assets that cannot be easily traced.
Cryptocurrency can be included as a part of an estate plan along with other assets of your portfolio such as money, property, and personal belongings. However, because of its secure nature, gifting bitcoin or an altcoin requires extra steps.
For example, the transfer of real estate merely requires some paperwork and making sure your beneficiary can get a copy of the key. However, when bequeathing cryptocurrency, you need to find a way for your beneficiary to locate and access your private key without giving up your security. Keep reading to find out how to go about this process.
Without its private key, there is no way to access a crypto asset. That means that if you die without leaving a way for someone to locate and access the private key, your cryptocurrency will essentially be lost in the digital ether. Although the asset will remain in your possession, and your private will remain a part of the cryptography, it will be lost and inaccessible. That’s why adding cryptocurrency into your estate plan matters.
Including any cryptocurrency you own into your estate plan, such as a Will or Trust, is the only surefire way to ensure your beneficiaries will have access. This holds true for any other type of digital asset as well.
By using your estate plan, you will provide the legal right and necessary instructions so that your cryptocurrency and private key information will be transferred into the ownership of your beneficiaries. It’s a powerful tool to pass on your private key information upon your death, without compromising your security and privacy in the present.
When you pass away, your executor will distribute property and assets to your named beneficiaries, per the instructions you left behind in your Will. If you have any cryptocurrency you’d like to bequeath to a loved one, then you’ll need to include a cryptocurrency provision.
In this provision, you should specify which cryptocurrencies and the number of coins you own. In addition, you’ll leave information on how to access your private key and thus your digital wallet that holds your cryptocurrency via a separate document. In our second blog, we’ll explain exactly how to pass on your private key information and the different types of digital wallets you can choose from.