Cryptocurrency is here to stay. The impact of cryptocurrency has already caused a massive buzz on the internet. There are positive and negative effects of cryptocurrency, but as more and more people become aware of it, it is time to prioritize the protection of your cryptocurrency.
Protection of your crypto is necessary so you can ensure your cryptocurrency stays in good hands after you become incapacitated or pass away. Nothing is more heartbreaking than knowing that if you pass away, your loved ones will not be aware of your crypto and probably could not take control of your crypto estate.
Cryptocurrency inheritance is the first step to identifying and analyzing how you can protect your precious crypto assets and pass them on to your family members or even a charity or foundation you support.
But before that, it is critical to understand what cryptocurrency is and how it works. And then later show how crypto inheritance is essential and its disadvantages also. So let’s delve deeper.
What is cryptocurrency?
Cryptocurrency is digital money. First introduced in 2008, Bitcoin was the first cryptocurrency launched by an anonymous user Satoshi Nakamoto. Blockchain and cryptography were the two most prominent breakthrough technologies that made cryptocurrency happen.
Blockchain is a distributed ledger. Cryptocurrency exists because of the blockchain. The blockchain contains connected blocks, and each block contains a set of transactions verified by the network members. These members or users help contribute to the blockchain and are often rewarded for their contribution.
As verification requires tremendous energy, cryptocurrency and sustainability do not go hand in hand. Green cryptocurrencies are being introduced to the market. These are developed to consume low energy and leave a minimal carbon footprint.
Cryptocurrency owners can use crypto exchange apps to buy, sell or invest in cryptocurrency. The exchange app only holds the private keys that identify your tokens or coins and verifies your transactions on the blockchain.
There are many altcoins on the crypto market now. Ether, Tether USD, and Ripple are some popular ones whose market caps are now touching the sky, Metaphorically.
Cryptocurrency is decentralized. It is immune to government influence and poses a solid alternative to cash. However, being all digital, it is prone to attacks from scammers. Because cryptocurrency uses cryptography somewhat similar to encryption, it is nearly impossible for hackers to get into the blockchain.
It is estimated that to attack the bitcoin blockchain; the hardware cost would be more than four billion dollars. And blockchain is constantly being checked and verified by tremendous computing power by users across the globe.
Cryptocurrency is also very private. You do not have to provide unnecessary personal information when paying a merchant, unlike banks or payment services which might use your personal information to sell their product to you or sell your information to third-party advertising companies.
These are some benefits of using cryptocurrency but first, let’s understand crypto inheritance planning now.
What is known as crypto inheritance planning?
Cryptocurrency is relatively new. Even after being older than a decade, the estate plans have yet to catch up to it. Many people are investing in cryptocurrency to make huge profits. Some people even invest their life savings into it, which is why it is critical to consider cryptocurrency inheritance.
With crypto inheritance planning, you can pass on your essential crypto to your loved ones after your passing. Even with or without a will, your cryptocurrency will go through probate. The only difference is that if you did make a will, the designated beneficiary would get your crypto.
Since cryptocurrency is digital and there is no physical manifestation if you have invested in cryptocurrency, not having proper login credentials and instructions on how or where to access your crypto assets can become a massive problem for your loved ones after your passing.
Why Are Some People Interested in Cryptocurrency?
There are many reasons cryptocurrency has become so critical to some people, but others have yet to. But one of the biggest reasons is that people see cryptocurrency as a property they can use to gain massive profits instead of a currency.
People buy crypto at low prices and sell when the prices are higher. Because cryptocurrency solely depends on its supply and demand, cryptocurrencies value varies a ton, even in a single minute.
When the first cryptocurrency, Bitcoin, was launched, it cost $13, but today it costs more than $20,000. That is a substantial amount, and investors all around the globe saw this potential and started to invest more and more.
But there are more advantages to cryptocurrency. Because it is entirely immune to government influence, a cryptocurrency costs the same in all countries at a specific time.
This, paired with the fact that as long as you have a laptop or a smartphone or any electronic device that can access the internet, you can use it to open up crypto exchange websites or apps to make transactions, defines portability that regular cash cannot do.
It is also straightforward to manage your cryptocurrency. You do not have to worry about someone stealing your cryptocurrency physically. And to even secure your crypto further, you can use a hardware wallet that can disconnect your crypto from the internet and put it on a storage device.
What are some downsides of cryptocurrency Estate planning?
Crypto inheritance planning might have become a very positive thing in your mind, but it has some downsides. The first and foremost is crypto inheritance tax, as HM Revenue and Customs consider cryptocurrency property.
The next one is that cryptocurrency is volatile, which does not play nicely with the fiduciaries. Fiduciaries can be a person or an organization that acts on behalf of another person or entity. Most of the time, fiduciaries are not equipped with the proper tools to keep the assets safe.
Therefore it becomes very critical to pick the fiduciaries carefully. In a crypto trust, the trustee can be anyone, an individual, or a third party. But a third party such as a bank would be more beneficial as the bank will not be biased and decide on the beneficiaries’ best interest.
Benefits of including cryptocurrency in estate plan
Although cryptocurrency is relatively new, it is still a digital asset and can be passed on to your loved ones after your passing. There are many benefits of putting cryptocurrency in an estate plan, such as a trust so let’s discuss a few.
Ensures your assets will inherit by your loved ones
One of the significant benefits is that you can decide who to choose as the beneficiary. Your estate plan will outline where your assets should go after your death without further complications and questions.
Another benefit of crypto estate planning is that using a trust can avoid probate. Probate can cost 2 to 7% of the estate as court fees. Not only that, but the probate court can also take years if the estate is very complex. Using trust, you can also avoid income and capital tax.
Provide for those in need
You can even decide to support a charity or a foundation that you support after your passing. You can even list someone in your estate plan who may need help. The special trust will inherit your cryptocurrency to them safely.
An estate plan for any incapacity
An estate plan can help your immediate family in their time of grief. Life is unpredictable, and setting up estate plans to make sure your cryptocurrency assets are not something your family has to worry about can be very beneficial. It does not take a lot of time or money to set up.
Cryptocurrency is here to stay as it is based on future-proof technology. As more and more merchants around the globe start to realize the potential of crypto, it will become more famous as well. Therefore, it becomes critical to set up a digital inheritance crypto.
With cryptocurrencies come their advantages and disadvantages, which are something to be aware of and be considered. Estate planning is very beneficial and is a must for almost everyone heavily investing in cryptocurrency.
A Trust or Will can protect cryptocurrency assets, and there is no age limit. You can always change wills and trust in the future if they are set up now. The culture around cryptocurrency estate planning is still underdeveloped, but setting up a trust is very easy with the help of a qualified legal attorney.