Cryptocurrency markets

Transfer of digital assets by inheritance

Transfer of digital assets by inheritance
The Romans invented inheritance law a little earlier than cryptocurrencies, social media accounts, airline bonuses, phone numbers for authentication, and other familiar things appeared.

Crypt on the exchange

If the crypt is stored on an exchange, then the order of inheritance of access to the account and the cryptocurrency stored there is determined by the rules of the corresponding exchange. At the same time, access to an account on the exchange and ownership of the assets contained there are two different things. Someone can trade from their account with third-party funds, but it is not necessary to be the owner of this crypt, but this is a separate issue. First you need to understand what happens to the account in the event of a client's death.
Here are the account inheritance rules set by the largest exchanges:

    Coinbase: the rights to the account are transferred to the heirs (clause 13.12 of the User Agreement), there are still separate clarifications. If for several years the user does not show any activity in the account, then the cryptoassets contained there can be considered escheat property, which Coinbase is obliged to transfer to the relevant state (clause 13.9).

    Binance: There is nothing in the rules of this exchange about an assignment in favor of heirs or escheat property. In addition, paragraph VI.3 says that if the account is closed, then all funds go to Binance.

    Gemini: Contains similar rules to Coinbase regarding assignments to heirs. The recipient of the escheated property is a specific state - New York.

Thus, if the heirs are not aware that the testator had an account on the exchange, then the funds from it will go to the state or the exchange itself. Accordingly, in order to inherit the cryptocurrency that is stored on the exchange, the testator must at least inform about the presence of an account on the exchange, and even better - directly indicate the heir in the will.
Transfer of digital assets by inheritance

Transfer of digital assets by inheritance

A single password-login combination may not be enough, because often two-factor authentication is required to log in via email, phone number or an application, for example, Google Authenticator. So how these things are inherited is even more important, because the password for the account can be restored via mail. We will talk about this in the following articles.
Hardware wallet

Take the Ledge Nano as an example. This hardware wallet can be accessed through a combination of numbers (pin) or through a 24-word combination.

To access the private key on a hardware wallet, you need to:

    Physically own a USB flash drive and know the pin code.
    Know the 24-word combination to regain access to another wallet.

To transfer a crypt to someone, the private key to which is stored on a flash drive, you need:

    Send the flash drive itself and at the same time the pin code.
    Send a combination of 24 words.

You can think of many ways - it all depends on your imagination:

    Put the USB stick to the cell, and report the pin code in the will;
    Pass a combination of 24 words in the will;
    Write all the information in a diary and leave it in the family library until better times.
Multisignature wallet

A multisig wallet (multisig wallet or "multisig") is a software that allows you to manage cryptoassets through a consensus mechanism. For example, a transaction with funds occurs when two out of three private key holders approve (sign) the transaction.

If one of the signatories dies, then, accordingly, those who survived him can actually decide on the disposal of funds.

It should be noted that the procedure for disposing of funds through a multisig after the death of the testator should not legally predetermine the ownership of these funds.

Let's take an example when three users agreed to use multisig to protect their funds. The first contributed 50 bitcoins, and the second and the third - 25 each. If the first dies, then his heirs should be entitled to all 50 bitcoins, provided, of course, that: (a) they generally know that there was some kind of multisig, and (b) can somehow prove that the testator owned exactly 50 units and oblige other signatories to transfer funds to them. If these signatories are the heirs themselves, then this is good, but this is not always the case.
Professional custodian

The services of professional custodians are used, as a rule, only by legal entities: hedge funds, stock exchanges, family funds and others. Examples of such custodians include Xapo, Kingdom Trust, and Coinbase Custody.

Therefore, the question of the order of inheritance of the crypt in this case is transformed into the question of the order of inheritance of participation rights (shares) in such legal entities.

If the cryptocurrency is issued, for example, to a family fund that keeps it with a professional custodian, then the procedure will be described in the declaration of such a fund. It will most likely provide that the offspring do not have any direct rights in relation to cryptoassets, and all decisions will be made by a collegial family body.

The advantage of storing cryptocurrency with professional Astodians is that the custodian's liability to clients is usually insured. Therefore, in the case of a large custodian fakap, you can expect to receive some kind of compensation. Here you need to look at the specific conditions. There is only one drawback - it is expensive.

I would like to finish the description by choosing the most effective and safe way. But to be honest, I don't know which of the above is the best way. I know that some crypto owners choose a combined approach: something is stored in hot wallets on exchanges, something is transferred to a family fund and then transferred to a professional custodian, and some is stored in a cold wallet.

The only surefire advice is that you should think in advance about the transfer of digital assets by inheritance. This applies not only to crypts, but also to all other types of assets that have undoubted value in this world and can be inherited: from rare domains to accumulated miles.

For example, there are special rules for the transfer of intellectual property or rights from corporate agreements. Tax consequences can also differ depending on the jurisdiction in which the assets are registered.

In the best tradition of such publications, I will leave here a link to our guide to inheritance planning, which will maximize these issues and suggest schemes for the transfer of wealth to other generations when we finally finish it.

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