Creating a Cryptocurrency Will, If Not Now Then When?
Creating a will is an essential step for anyone who plans to transfer their wealth to family and friends when they die. While amassing assets and investments during one’s lifetime is a great accomplishment, the ability to identify those to which assets should be bequeathed upon your death is something that shouldn’t be taken so lightly. This is especially true in a world in which more assets and investments are stored and recorded digitally. In the past items were predominantly tangible; a house, a car, or belongings including valuable jewelry for example. They could easily be retrieved and redistributed once it was determined to whom they should belong. With tangible assets when a person dies without leaving a valid will, their property can and would be shared out according to certain rules. These are called the rules of intestacy. If you die without a will, while your favorite niece may not receive your treasured classic car, one of your nearest relatives likely will. But this assumed assumption that someone will inherit your assets is simply not the case when they are digital, but more on that point in a moment.
I am sure it can wait
There are several reasons people put off writing a will; they feel it is too complicated; they feel it is too expensive; they don’t know where to start; they feel they have plenty of time or perhaps; they make assumptions that their assets will go to a particular person naturally. None of these are good reasons to put off writing a will in the best of times, but in the new digital world, putting it off is just not the smart thing to do.
Getting started isn’t that hard. Anyone above the age of 18 and in a sound mind can make a will. In its basic form, it consists of identifying items to be inherited and the name and contact details (such as a phone number, address or email) of those you wish to receive them. A will doesn’t need to be written by a solicitor nor does it have to be in a special format. The main requirements are that it identifies the person writing the will and that it has been seen to be signed by two independent witnesses not set to benefit from the disbursement of the will.
For basic wills, many inexpensive online options take you through a simple step-by-step process to complete. Many can be completed in less than 20 minutes without much hassle as the online process has been designed to be easy and straightforward. In the case of more complex situations, such as leaving items to minor children or where assets are held indifferent countries, for example, it’s easy to work with a solicitor to craft a custom will.
Things get more complicated when it comes to digital assets
Regardless of the personal situation or the complexity or simplicity of an individual will, things could all become a lot more complex when the assets to be distributed are digital, in particular when cryptocurrencies are involved. It is the complexity surrounding crypto assets that necessitates a little more planning.
Within the UK the government has identified Cryptocurrencies as assets, and these should be treated as property as a matter of principle. But simply listing ownership of given cryptocurrencies within a will not help loved ones retrieve the assets without also leaving very clearinstructions, which in the majority of cases would also include the necessity to leave passwords, privately identifying information, codes and detailed retrieval instructions.
Why is Cryptocurrency so unique?
Cryptocurrency is designed to facilitate a secure transaction between two parties, without the need for a trusted third party, such as a bank or credit card company. All of the cryptocurrency is stored on a Blockchain or similar ledger. To move these funds, you need to complete a transaction using your private key, which is the set of alphanumeric characters unique to your cryptocurrency wallet. The private key is often stored in a heavily encrypted state, and a complex password is usually required to access and use it.
Not only is it impractical to update passwords and codes each time they are changed it is also highly unsecure. We are in a world where we are taught to keep our passwords safe and secure and never give them to anyone else, so if the passwords are the access point to what could be significant crypto holdings, writing them in a will or handing them over to a third party could be a very risky proposition.
Such is the nature of cryptocurrency that with the death of the currency holder, without the wallet keys, the cryptocurrency cannot be accessed by anyone else, so holding of cryptocurrencies presents a real dilemma to the owner. How to keep their cryptocurrency safe and secure while they are alive yet have the ability to ensure they can be passed along to loved ones should they die?
What can I do to ensure my cryptocurrency holdings can be inherited by someone?
Fortunately, as the cryptocurrency industry matures so does the technologies, products, and services around it. Thanks to technologies like multi-sig wallets a user can allocate to a third-party custody of a back-up key to be used to open their crypto wallets in the case ofan emergency. (read more about multi-sig wallets). A typical emergency would include the loss of access to the funds by the owner, but when the owner is not around the same technology can be used by the owner’s relatives to retrieve funds. It is here that the concept of a Cryptocurrency Will comes in.
In its simplest form, a Cryptocurrency Will comprises of a third party holding a backup key(s) to a customer’s crypto-holding wallet(s) and upon the death of the owner, the third party would retrieve funds on behalf of the beneficiaries. Of course, as is the case withthe execution of any will, checks would be in place to check death certificates, executors and probate documents. Probate, which also soundscomplicated, is simply a legal document that allows the executor of the will tosort out a person’s estate as instructed in their will.
Isn’t creating a Cryptocurrency Will complicated and expensive?
Not only is it simple and straight forward to set up a Cryptocurrency Will, but the downside of not doing it could also mean your funds are lost forever. It just takes moments to get started and is not difficult. It is a simple 6-step process:
1. Activate your Cryptocurrency Unique ID
To get started purchase your Cryptocurrency Will kit which will include a unique ID that you will activate at www.coincover.com/wills. This ID is unique to you and your Cryptocurrency Will. Once activated, this number cannot be transferred to someone else.
2. Confirm your Identity
Fill out your details, such as name, address, date of birth and contact information to link your Cryptocurrency Will to you.
3. Identify your chosen executor
Identify your Executor, who will be responsible for distributing your cryptocurrency in line with your wishes.
4. Set up your Will wallets
When you set up your Cryptocurrency Willyou will need to protect your cryptocurrency by setting up a new multi-sigwallet(s) specifically for your funds. This wallet provides you with completecontrol, secure custody and continued access of your funds up until yourdeath. This part is important as itensures your wallets and your cryptocurrency are set up in the correct way toallow for funds to be retrieved after your death. It requires three steps. Witha Coincover Will, you would need to create BitGo multi-sig wallets withCoincover protection.
5. Distribute your notification cards
The very last step for your CryptocurrencyWill is to let people know that it exists, and what to do in the event of yourdeath. A Cryptocurrency Will service contains information to explain torelatives how they should retrieve your cryptocurrency when you die. ACryptocurrency Will Kit from Coincover includes notification cards to be givenout to beneficiaries. It is recommended one of the notification cards be placedwith your Executor.
Why is a multi-sig wallet necessary?
The reason for storing cryptocurrency funds in a multi-sig wallet is due to the need for the keys for multi-signature wallets to be created at the time the wallet is set up, with one of the keys added to the key recovery service (KRS) provider’s secure storage vaults. Keys cannot be created and distributed after the fact. For Coincover to provide the service for Cryptocurrency Wills, we have chosen to partner with BitGo, the market leader in corporate-grade multi-signature wallets and for the reason of not being able to create duplicate keys after a wallet has been created, Coincover is unable to protect and retrieve funds that are not in BitGo wallets protected by Coincover.
How safe is a Cryptocurrency Will?
All the while you have access to your cryptocurrency you are in complete control of it and the Key Recovery Provider (Coincover) can't access, retrieve or move your funds. Only in the event you’re your death can the trigger be executed to facilitate Coincover working with BitGo as a joint back-up key custodian to jointly open the wallet, retrieve and transfer the money to an alternative wallet. For an Executor, Beneficiary or loved one to access your cryptocurrency they will need to provide the necessary legal documentation and proof before any movement of your funds can take place.
Do I have to disclose details of my cryptocurrency holdings?
With a Cryptocurrency Will, you have to disclose no other details than simply the fact that you have a Cryptocurrency Will and with which company it is covered. That’s it. You don’t need to reveal passwords, keys, or even the types or volume of holdings you may have. It’s nothing more than telling your relatives you bank at a certain bank – they need to know no details.
What happens if you die without a Cryptocurrency Will?
Quite frankly nothing happens. And that’s not a good thing. Your relatives may or may not know you have Crypto, but without a will or without having handed over secret keys and passwords the cryptocurrency is simply not retrievable. It would sit, recorded in your wallet on the blockchain for eternity for all to see yet no one to access. Many years down the line it’s quite likely it will be worth something to someone.