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The Big Crypto Question: Can Cryptocurrency Be Inherited?

The Big Crypto Question: Can Cryptocurrency Be Inherited?, FP Markets

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You can inherit digital currency (bitcoin, Ethereum, or Binance coin, for example). If a family member or friend has invested in cryptocurrency, they can legally leave it to you. Although cryptocurrency is a relatively new digital asset class, it’s still considered an ‘asset’. Therefore, it can be lawfully transferred to another person following the owner’s death.

However, unlike in systems with a central authority, if someone loses their private key or passes unexpectedly, there is no means to recover the private key and regain access to the money (unlike systems with a central authority). Despite every effort to safeguard your online activities, hackers still target cryptocurrency exchanges. As a result, it is critical to save vital information offline.

The Big Crypto Question: Can Cryptocurrency Be Inherited?, FP Markets

 

What Happens to Your Crypto If You Pass away?

When you pass away, your assets normally fall into one of three categories.

  1. Without a proper inheritance plan in place, such as a will, a loved one would be required to seek probate. Next, the probate court would determine how your assets should be allocated under intestacy statutes.
  2. Even if you have a Will, your estate will still be subject to probate. Your assets would be dispersed to your lawfully appointed heirs. Remember that probate is a lengthy procedure that might last several months or even years.
  3. Additionally, there are court costs and the chance that a portion of the asset will be utilised to repay debts.

The Big Crypto Question: Can Cryptocurrency Be Inherited?, FP Markets

 

Additional Considerations:

  • Cryptocurrency Will.

Without these keys and passwords, individuals entitled to inherit their family members’ or loved ones’ crypto assets won’t be able to access them. The key should be stored securely offline and not revealed until death. Arrangements must be made to pass any keys and passwords to the executor. In all cases involving the inheritance of cryptocurrencies, the timely preparation of a valid will containing the necessary details and arrangements is important. Millions of dollars have been lost due to losing or destroying passwords or keys accidentally.

Various providers have also made use of blockchain technology to help users set up systems through which keys to digital assets can be shared with beneficiaries after death.

  • Inheritance Tax and Capital Gains Tax.

Investors in virtual currency should get legal and tax guidance to ensure that all risks have been mitigated. Bear in mind that different countries have different rules for income tax purposes: HMRC in the UK and the IRS in the United States, for example.

  • Set Up a Trust.

To prevent the possibility that your cryptocurrency will go unnoticed following your death, you can transfer ownership to a trust in the same way you would any other asset. Your estate would avoid probate entirely in that case. Your assets will be distributed following a trust’s terms. Additionally, these assets may contain extra requirements or instructions. Don’t forget to provide the trustee with the passcode or keys to your cryptocurrency account so they can access and manage it on your behalf.

  • Clear Instructions.

It’s critical to emphasise that cryptocurrencies could pose a problem when you pass away. Use caution when performing inheritance planning. Even if you leave a will, it is unlikely to provide an exhaustive list of all of your possessions. It’s imperative to give clear instructions to the trustee regarding access to keys passwords.

  • Intestacy Laws.

In the event that you have not made a will or appointed a trustee, Intestacy Laws may come into effect. These laws vary from country to country, so it’s important to take the necessary steps (such as making a will or establishing a trust) to ensure that your designated loved one receives their inheritance.

Final Words

While your cryptocurrency is awaiting a decision from the probate court, it is subject to market volatility. As a result of this, it is prudent to put in place a sound succession plan.

Some cryptocurrency exchanges allow the owner to designate a beneficiary, which is beneficial to the exchange. Despite the fact this is rare, designations are not required to be included in estate plans or to be administered through probate. Upon the death of the asset’s owner, the asset would be transferred to you immediately.

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