Crypto Inheritance Planning vs. Traditional Estate Planning

Why Crypto Inheritance Needs Special Attention

Crypto assets don’t work the same way as traditional financial assets when it comes to inheritance, and they’re not like physical assets, either.

• Traditional financial investments usually include a beneficiary as part of the financial institution account. Institutional processes will manage inheritance distribution.
• Physical assets might be located on your property (or even at a marina, stable, or airport), and are often registered or insured in your name, leaving a clear “paper trail” of ownership. Generally, your beneficiaries are aware that you have them, and they will be easily discoverable when you eventually pass. These assets will be sold or distributed among your beneficiaries according to your wishes as expressed in your will.
• Crypto assets are generally not discoverable by others unless you make a specific effort to make them so. This is why making an inventory of your crypto assets and setting up a plan to redistribute them as part of your inheritance plan is so critical.

For each asset type, you should consult with experts to consider legal and tax issues relative to transferring ownership of the assets when needed.

For crypto assets, you also need to consider the security of your digital holdings while you are still alive, and a safe mechanism for transferring access to your crypto wallet after you pass. This is where Vault12 Guard can help you.

Legal and Tax Considerations

Crypto inheritance is affected by many of the same jurisdictional issues that affect traditional inheritance, such as laws surrounding wills, probate, and executors. Depending on your area, rules on taxes and transfers can affect how your crypto assets are inherited. This is why it’s crucial to consult legal, financial, and tax professionals who understand both traditional and crypto-specific inheritance planning. They can help you navigate those rules and make sure your plan is effective and compliant.

Security Before and During Inheritance

You likely already know that you need to “keep your guard up” to protect your crypto investments while you are alive. There are risks seemingly around every corner! One of the unique risks to cryptocurrency holdings is that you should not trust anyone or any institution with seed phrases to your crypto wallets while you are alive. Also, due to several types of threats, your privacy is of utmost importance - you don’t want to tell many people that you even have crypto holdings.

What to Consider in Your Crypto Inheritance Plan

Be sure to cover these steps when adding digital assets to your estate planning:

1. Consult inheritance experts: Choose an estate planner or inheritance professional who knows crypto. They can guide you through the following:
   1. Tax implications of digital asset transfers.
   2. Legal frameworks that govern the inheritance process for digital assets, including how trusts and sales of these assets might affect beneficiaries.
2. Consider your need to secure and protect your private keys and/or seed phrases: These are the gateway to your assets so keep them secure.
3. Consider your need to document your digital assets: When you implement your inheritance plan, you will need to create a detailed inventory of all your assets including every wallet and other blockchain-related holdings. For NFTs, you will need to make sure both wallets and original media files are backed up.
4. Include a technically-minded beneficiary. Choose someone you trust who can manage the technical aspects of accessing and potentially transferring the assets in your wallets. You might have a simple scenario where you store a small number of wallet seed phrases (which might not require a particularly advanced technical beneficiary). But your crypto holdings might be complicated, or sprawl across multiple platforms. Every individual situation is unique.

Crypto inheritance planning is an essential part of securing your digital legacy that is better done sooner rather than later. By planning now, you’ll avoid costly mistakes, and gain peace of mind from knowing that your assets will be conveniently passed on as you intend without risk or confusion.