Ensuring the Secure Transfer of Cryptocurrencies Upon Death

Are you the rightful heir of valuable cryptocurrencies? If so, listen up. Your task may require a bit of a pirate mentality and keen treasure-seeking skills. Why? Because claiming these assets could be a challenging endeavor. And if you happen to hold crypto assets, it’s crucial to act now to prevent the loss of these funds in the future.

In the United States, cryptocurrencies are classified as digital assets rather than traditional currency under estate law. While you can easily plan the distribution of money and physical possessions through estate planning tools like wills and beneficiary forms, the same cannot be said for digital assets such as cryptocurrencies. In the absence of explicit instructions from the deceased, passing on digital assets like cryptocurrencies can be a complex legal matter.

The process of transferring cryptocurrencies after an individual’s death hinges on whether the assets are held in a custodial wallet or a non-custodial wallet.

Understanding Wallet Types

Custodial wallets involve a third party, like a bank or cryptocurrency exchange, managing your assets on your behalf. Dealing with custodial wallets postmortem is typically more straightforward compared to non-custodial wallets.

On the other hand, non-custodial wallets give individuals full control over their assets, bypassing intermediaries. This option is favored by crypto enthusiasts who value independence from traditional banking systems.

Non-custodial wallets can take various forms, from software-based to hardware-based, or even as simple as a paper with access instructions and a password. Regardless of the type chosen, transferring assets from a non-custodial wallet will require a DIY approach.

Pros and Cons of Custodial Wallets

Utilizing a custodian for your cryptocurrencies allows you to select providers with established beneficiary processes in place.

Financial institutions like Charles Schwab and Chase offer cryptocurrency services and expertise in asset transfers after death. Schwab, for instance, integrates cryptocurrency services into its brokerage accounts, making inheritance arrangements seamless for both financial and virtual currency accounts.

Another benefit of using a bank for cryptocurrency storage is the visibility of your account to multiple parties, including the bank, government, and credit agencies. This ensures a more straightforward process of locating and accessing a deceased individual’s bank holdings, unlike non-custodial wallets.