Cryptocurrency is an emerging asset class. It has the potential to be a major disruptor in global financial markets and it will certainly be a topic of discussion for many years to come.
Cryptocurrency investment is a good way to diversify your assets. It can also have a significant impact on your estate plan.
Asset protection is another important benefit of investing in Cryptocurrency. As the Cryptocurrency market continues to grow, you can protect your assets from any negative events that may happen in other markets.
What Cryptocurrencies Are And How Do They Work?
Cryptocurrencies are digital or virtual currencies that can be exchanged and verified through a process called “mining.” Cryptocurrencies, such as Bitcoin, provide an alternative to traditional forms of currency and can be used anonymously.
Approximately 10,000 cryptocurrencies are available today. As with every other currency, cryptocurrencies have seen their value rise and plummet in recent years, but the popularity of this asset never waned. There are several reasons for this:
- In direct transactions (specifically, on Decentralized Cryptocurrency Exchanges and Non-Custody Wallets), no third parties (Credit Card companies or banks) are involved, eliminating the need to pay huge processing fees for online transactions.
- The governments do not regulate digital currencies, so they remain free from state policies.
- Bitcoin is highly valued for its ability to resist inflation since its supply is limited(21 million). Every 4 years, the quantity of Bitcoin mined is decreased by half.
- Cryptocurrencies have become very popular over the past few years, as popular companies and celebrities are taking interest in them. This has resulted in an exponential rise in investments in this Digital Asset.
- The anonymity of crypto wallets is provided by private keys. A crypto wallet’s public key is made publicly available, and its private key is kept secret.
Following are the reasons to include Cryptocurrency as part of your Estate Plan:
- An Estate Plan makes accessing and transferring funds and accounts to your family members simpler.
- Estate Planning helps eliminate disputes among your cryptocurrency inheritors.
- The risk of theft of funds and identity can be minimized until the funds become accessible to the family members.
Include Cryptocurrency In Estate Plan
Some people plan their Estates based on their Crypto holdings, for example by dividing up the coin holdings evenly among their heirs or putting restrictions on who gets to access them after they die. Following are the ways to fit your Cryptocurrency in the Estate Plan:
- With a reliable friend or family member, share your seed phrase (master password).
- It’s best to distribute your seed phrase and private keys among several highly trustable individuals in order to prevent a single individual from having complete control over your digital assets.
- Adding your cryptocurrencies to your Will along with other Digital Assets will allow you to identify how your assets will be distributed among your family members. Your cryptocurrency can be held in a Trust, which can avoid probate and ensure the privacy of your accounts. Assign a loved one or corporation to serve as trustee of the trust and transfer ownership of Crypto Assets into the trust.
- Use a hardware wallet or software application for custody of your crypto-assets.
- Cascading multi-signature wallets is a better alternative than self-sovereign wallets since responsibility is split among multiple individuals.
The Estate Plan needs to be updated whenever any changes are made to the Cryptocurrency Wallets. It may seem cumbersome to create, update, and maintain an Estate Plan, but with a Digital Estate Plan, you can cover all the requirements for planning the transfer of your crypto and other digital assets with ease.
By using Clocr, you can easily create a Digital Estate Plan that protects your personal and financial assets.