There are a number of advantages to owning crypto assets. Some are so significant that the person who owns that specific asset needs to have some arrangement so that their assets are not lost after they are no longer a part of this world.
On average, 1 out of 10 Americans invest in crypto. The popularity is growing worldwide, but only some consider protecting crypto assets. Some people do not think crypto assets are that significant to be worth saving, but for most, they are, and they quickly get wrapped up in not thinking about crypto inheritance.
Of course, the protection of your crypto assets is necessary. A crypto trust or crypto will go a long way in helping you and your loved ones if you become incapacitated or pass away. So let’s delve deeper and understand what crypto trust is and how significant it can be.
Explaining Crypto Trusts
A trust is a fiduciary agreement between 3 parties: the trustor, the trustee, and the beneficiary. The trustor is the first party, the owner of the assets in the trust itself, deciding to create this trust. The trustee is the second party and the person or entity (like a bank) responsible for managing and handing over the assets once the first party has passed away.
The beneficiary is the third party. They will get the assets with clear documentation on how or where to access them. The beneficiaries can be anyone, a family member or a charitable trust.
For the trustee, their main goal is to hand over the assets. If the trustor has provided specific instructions or things to share along with the assets written in the agreement, then the trustee has to follow those instructions.
Crypto trust works the same way. Instead of putting other types of assets like a typical estate, in a crypto trust, you only include crypto assets. Most crypto assets are kept in a safe crypto exchange or wallet. Therefore, in crypto trust, the information is usually put on how the beneficiary can access them after your passing.
Crypto trust could contain your login credentials or how or where to find your hardware wallet. A hardware wallet is a storage device that keeps the private keys (required to make and authorize transactions) disconnected from the internet to prevent it from being hacked.
Trust’s main advantage is that anyone can pair it with almost every situation. There are many types of trust that many people with different situations can use that they need to handle. Trust can also help avoid probate altogether but more on this later in the blog so keep reading.
How to create a crypto trust?
The first and foremost step is to recognize what type of trust you need to have. A living or testamentary trust will ensure that your assets are passed to the beneficiary after passing. Meanwhile, a generation-skipping trust will skip a generation after you and then pass on your assets.
After recognizing what type of trust you want, it is time to organize your crypto assets together. Clear documentation with concise instructions would be very beneficial for your loved ones. Bitcoins, brain trust crypto, or twt crypto are valuable crypto assets, so remember them.
The third step is to choose the trustee. A good option is to hold a meeting with your trustee if they have any requests in the trust or any questions they might need clarification.
The fourth step is to choose the beneficiary, anyone, from one or more of your family members to a charity or foundation you support. You decide to tell them that they are the beneficiary of a trust.
The fifth and final step is to draft the trust deed or agreement by contacting a qualified legal attorney. Discuss everything from point A to point B with your attorney, and if you want, you can appoint a power of attorney to manage assets outside your trust.
You might create a crypto trust very early in your life. Therefore, it is a must to keep the instructions updated if you decide to use two-factor authentication, then the beneficiary would also require access to the authenticator.
Importance of crypto trust
The most significant advantage of protecting your crypto assets under a crypto trust is that it can avoid probate. Only the trustee appointed by the trustor can know the details, which, compared to probate, is very private because, in probate, the details become a part of the public record.
For probate court, you must pay anywhere from 2% to 7% of the estate as court fees. This might not sound significant, but while all your estate or crypto assets are in probate court, your family would not have access to them.
If your estate is very complex, it will take a long time for the probate court to decide how to distribute the assets to the beneficiaries. It could take even years. A trust will protect your assets from any fraud by creditors and reduce jurisdiction, income, and capital tax.
Crypto assets can drop their value overnight. If your crypto assets have higher value, they might become a target for hackers, and they might try to steal control of your assets. Your valuable crypto assets might also be exposed to market volatility while awaiting the probate court decision.
A crypto trust would avoid all the probate problems. Only the parties involved would know how and where to access your crypto assets. Crypto trust will keep them safe and private, away from any third person.
Suppose you think the document containing everything needed to be given to the beneficiary is vulnerable. In that case, you can put it in a safe place that only the trustee can open after your passing, like a safe deposit box.
On top of this, as mentioned before, there are many types of trust that you can make. The discussion with your attorney should discuss what type of trust would suit you the best. It would help you make the right choice.
To be clear, digital estate planning and legacy planning do exist, covering a lot or not all of your digital assets. But crypto assets are somewhat specific, even being a part of digital assets. For most people who invest in cryptocurrency, crypto assets are more valuable and more overlooked than other digital assets.
The above, paired with the fact that anyone can invest in crypto, becomes more of a hype train to jump on rather than being serious about it. Losing your crypto assets would be devastating, and protecting them under a cryptocurrency trust would be beneficial.