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The unexpected demise of Gerald Cotten, CEO of the Canadian exchange QuadrigaCX, brought to the table the issue of how to manage the inheritance of cryptocurrencies.
The exchange announced that it had no access to its clients' funds, more than 135 million dollars in cryptocurrencies because apparently, Cotten took the private key of the wallet to his grave. Yes, it is a small and mysterious problem that we do not know if it will have a solution.
It is not particularly pleasant to think about our premature death. However, this event invites us to reflect on how to leave these assets in the hands of our loved ones, instead of disappearing forever.
How to make sure you do not miss your money?
Many possessors or custodians of large fortunes in cryptocurrencies reject risk mitigation plans -such as the case of premature deaths, according to Pamela Morgan, a specialist lawyer in inheritances of these assets.
Morgan has already witnessed first-hand situations in which the deceased had not correctly planned how their relatives will inherit their crypto-active and, consequently, left important assets in limbo.
According to Morgan, the first obstacle is admitting that death will come sooner or later. Just as there is a custom of leaving a will describing the use and distribution of the patrimony of the deceased among its beneficiaries, a cryptocurrency inheritance plan can also be drawn up.
However, there is still very little information available on this sensitive topic and it is believed that having a plan puts the security of cryptocurrencies at risk. It is not about handing over private keys to a third party, nor about trusting a lawyer blindly, much less investing a large amount of money to develop a contingency plan.
On what fate do your cryptocurrencies depend?
Although we are accustomed to depending on third parties when it comes to our finances, the inheritance of cryptocurrencies depends on ourselves. This allows us to create a plan that adapts to each person and that considers the level of technological knowledge and the family situation, as well as the security of the home.
Step 1: write a letter to loved ones
Getting relatives to learn about cryptocurrencies from one day to the next can be complex. Therefore, in the first instance, it is advisable to share knowledge about this technology with our loved ones.
Now, to avoid the loss of our cryptocurrency agents, we can write a letter by hand, with the possibility of updating it when necessary. The document must clearly explain the reason for the letter and how to access private keys, seed phrases, wallet names, names and credentials for access to online trading accounts, passwords, pin codes, two-factor authentication and any other type of security measure that is used.
For example, we can indicate the physical location of a hardware wallet such as Trezor and the annotations of the seed phrase and the PIN that allow access to the hardware and the cryptocurrencies it contains. The same procedure must be followed for the wallets installed in the different devices.
Step 2: define the beneficiaries
After writing the letter and making sure that the technical details are clear, the second step is to draft a document - in the form of a will - in which it expressly states who are the beneficiaries of the cryptocurrency in case of death. It is suggested not to include the equivalence in fiat money of the cryptocurrency portfolio due to legal and tax issues.
If the cryptocurrencies are in a custodial wallet, like those of the online exchanges -which is not recommended-, the company that owns the platform may work together with the beneficiaries to provide access to the accounts. There should always be a backup document signed by the account holder. This process is long because it requires a court order to grant access to third parties. Then, the letter from the previous step can indicate the loved ones that start with the process as soon as possible and contact the exchange.
Step 3: beneficiaries must understand the plan
In order to verify that the beneficiaries are able to successfully carry out the recovery of the cryptocurrencies, it is advisable to perform a test or simulation. The objective is to ensure that they can access the wallets or accounts in which the cryptocurrencies are deposited, in accordance with the instructions of the corresponding documents.
One way to ensure that the inheritance of cryptocurrencies will be successful is to have one or two trusted people who have the technical knowledge to guide the beneficiaries when the time comes. It is not a good idea to absolutely depend on a lawyer to do the technical work since you probably do not know that aspect.
The best time to start? - Today
It is not a good idea to wait because this is really important. It is something that any person who possesses a cryptocurrency should do. Death can occur at the least expected time. For this reason, we must be prepared to solve the eventualities in a better way.
If you have managed to accumulate a huge amount of cryptocurrency, the loved ones who remain in this world will appreciate that you have taken the necessary measures so that they can use it. Contact blockchain development companies for your blockchain development.
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Author Bio
Harnil Oza is a CEO of Hyperlink InfoSystem, one of the leading app development companies in New York, USA and India having a team of best app developers who deliver best mobile solutions mainly on Android and iOS platform. He regularly contributes his knowledge on the leading blogging sites.
Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.