If you have been following stock and cryptocurrency news recently, then you have seen the articles about the dramatic increase of many of these assets. For example, in the past three months: Bitcoin is up ~135%, Ethereum is up ~230%, and Litecoin is up ~125%.
While these coins, specifically, and cryptocurrency, generally, are becoming more mainstream, these asset classes are still volatile and should only be invested in using your best judgment. However, if your risk tolerance is high enough to invest in cryptocurrency, then it might be time to consider how to transfer your crypto wallet to your estate.
Thankfully, cryptocurrency is relatively easy to transfer. Unlike a traditional brokerage or bank account, cryptocurrency merely requires the heir or executor to have your passcode to unlock your wallet and transfer the cryptocurrency. (Your estate plan should include language to avoid a violation of federal or state laws, terms of service agreements, or computer fraud acts.)
Keep in mind, that the ease of access opens your heirs to potential problems. Anyone who can access your passcode could easily log-in without your permission and transfer the crypto to an untraceable location. If you use this transfer method, make sure to be exceptionally cautious when selecting the person to hold your passcode.
An alternative method to reduce the risk of someone illicitly using your passcode would be to invest in a “cold storage” system. “Cold storage” is a method used to keep your cryptocurrency safe. The technique employs a USB drive or similar device which contains your account’s passcode. Only when that USB drive is plugged into a computer can your wallet be unlocked without anyone knowing your passcode.
This method is helpful because instead of writing your passcode out, you can transfer the USB drive to the person you want using your digital wallet. However, be careful when setting up your cold storage device.
Before transferring cryptocurrency using this method, be sure to contact an experienced estate attorney. Thrift McLemore’s qualified Wills, Trusts, and Estate Lawyers are here to help.