Bitcoin, Ether and other cryptocurrencies are still young technology. The first bitcoin was created in 2009, but it’s only in the last five years that blockchain technology has caught the attention of a wide audience. During this time, the value of many coins has increased significantly, and although prices are currently well below 2020 highs, a cryptocurrency wallet can be worth a lot. So how do you make sure those left behind benefit?
How is bitcoin inheritance different?
An important aspect of cryptocurrencies: what you pass on when you inherit is not the item itself, but access to it.
Because unlike traditional currencies or securities, Bitcoin and other crypto-currencies can quickly be lost if you are not careful. The reason for this is that cryptocurrencies are stored in a decentralized manner – and there may be no middleman who can deliver the cryptocurrency to its rightful owner, even if entitled to it.
Therefore, when inheriting cryptocurrencies, an important question arises: can my heirs even get the currency?
Inherit a wallet
A simple way to store cryptocurrencies is in a private wallet, stored for example on the computer or on a USB stick. Such a wallet is usually secured with a complex passcode. The danger here: once the access code is gone, it can be difficult or even impossible to get the bitcoins.
The easiest way to ensure that the bereaved can also open the wallet is to note the type of wallet and the access code – for example, in connection with the administration of the estate.
There are also technical solutions: Some password managers such as BitWarden and LastPass offer an “Emergency Access” function which allows surviving relatives to automatically access the data of the deceased after a certain period of time – including all information on the crypto wallet.
Inherit a crypto account
The situation is different if you do not store the cryptocurrency yourself, but have it stored by an online exchange such as Coinbase or Kraken, for example.
These crypto exchanges are similar to direct banks, but they are much less regulated than banks. If the crypto exchange is broken or hacked, in the worst case your own investments may also disappear.
In the event of a personal death, however, crypto exchanges have an advantage: relatives can contact them and, upon presentation of the death certificate and other documents, can take control of the deceased’s account — similar to a social media profile. .
How is a bitcoin inheritance taxed?
When it comes to inheritance tax, cryptocurrencies are ultimately no different from tangible assets and stocks. Even if only one access to a wallet is inherited, that access has a certain value, namely the value of the cryptocurrencies being accessed.