Is Inheriting Bitcoin Hard?

Many governments regard Bitcoin as virtual property that one can inherit. Find out how to inherit Bitcoin.  

Bitcoin’s classification as either a transaction currency or a store of value remains a contentious issue among regulators worldwide. However, many countries currently recognize and accept Bitcoin as a means of payment and an investment asset. For instance, the US government describes Bitcoin and other crypto investments as virtual assets, subject to property laws about taxation and inheritance.

While you can inherit Bitcoin, crypto has several unique properties to traditional assets that make the inheritance process a bit complex. For instance, the courts can order a bank to give the investments of a deceased person to his estate executor or directly to the named heirs. However, court orders are meaningless in Bitcoin inheritance because they are outside legal jurisdictions.

Besides, Bitcoin investments are secure due to private keys that one must access to comply. That means no one can access the funds even with a court order if they do not have the private keys to unlock the wallets. Thus, the Bitcoin owner must initiate the inheritance plans before their demise for success. Here are guidelines for planning Bitcoin inheritance.

Determine Your Bitcoin Holdings

Start by making a list of your total current Bitcoin holdings, their wallets, and their corresponding market value. It is advisable to keep things private and offline since the information is sensitive.

Separate Your Bitcoin Holdings into Tiers

Like using different addresses to transact Bitcoin, you should also consider separating the holdings into tiers. Decide the amount of Bitcoin to keep accessible and that you want to keep in long-term storage. Keeping the crypto assets separately also offers an added layer of security, ensuring you do not lose it all in case of a breach.

After that, create a plan for each tier, carefully balancing security, resilience, ease of access, and future goals. For instance, you can use a single-signature mobile wallet for daily Bitcoin transactions and a hardware wallet with multi-authentication solutions for long-term storage. Nevertheless, avoid holding your long-term Bitcoin investments on a crypto exchange. Even if it’s a centralized cryptocurrency like the digital Yuan, don’t hold it on a platform like Bitcoin Code

Think about the particular kinds of storage you are currently using to determine what is not working, how to improve them, and whether your heirs could access them upon your demise. Avoid using too many complex passwords and devices to strike a proper balance between security and ease of use.

Decide on Your Heirs and How They Will Share the Bitcoin

Each jurisdiction has different national and state laws that govern estate distribution. Thus, your plan must also put those laws into consideration for success. Those who already have an estate plan can integrate Bitcoin into it. However, speak to an attorney to ensure you are on the right track.

Your Bitcoin inheritance plan should indicate what each beneficiary will receive if different people or entities share the holdings. It is advisable to use percentages instead of complex values. Besides, you should make sure that your heirs understand the plan and can use it to access Bitcoin after your demise. You may want to assign someone to help your heirs through the process if you think they may have problems with it.

Your plan should also indicate how the inheritance will happen. For instance, you may want your estate agent to distribute the inheritance in Bitcoin or liquidate them into fiat currency before distribution to the heirs. You also need to create and store backups in controlled-access locations for contingency.

Overall, inheriting Bitcoin is not very hard. However, it requires proper planning to ensure things go smoothly. The above article has discussed the key pointers on planning for Bitcoin inheritance.

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