How do I inherit Bitcoin correctly?
If individuals do not create an estate plan for their bitcoin, heirs face a total loss. An estate plan allows you to determine the distribution of your inheritance yourself. With an estate plan, you can ensure that your bitcoin will not be lost after your death and that the distribution of your inheritance will go smoothly.
While the inheritance of shares, real estate or similar classic investments is relatively easy to arrange, the inheritance of Bitcoin is somewhat more difficult.
Self-custody = personal responsibility
Simply buying bitcoin does not provide independence. If your bitcoin are held by centralized exchanges, you are dependent on these institutions when it comes to spending or selling your bitcoin. You only have financial freedom if you have sole control over the private keys. Only then does the motto "Be your own bank" apply. However, this freedom brings a great deal of personal responsibility.
For some people, this can also be a disadvantage. After all, if you lose your private keys, send a transaction to the wrong address or take poor security precautions, you're on your own. There are no responsible parties to turn to for help. This circumstance requires you to be sufficiently familiar with the technology so that you can assess the risk and protect yourself appropriately with backups.
Why is an estate plan for bitcoin inheritance so important?
With a traditional bank account, the bank takes care of the whole transfer process in the event of death. To do this, the inheritance community must legitimize itself to the bank, for example with a certificate of inheritance, in order to gain access to the bank accounts or safe deposit boxes.
With digital assets, on the other hand, there is no customer support or contact person to assist with the inheritance. That's why, in addition to custody, the estate plan is so important when investing in Bitcoin. Often this planning is neglected or underestimated.
This belongs in the Bitcoin estate plan.
- Wallets: List what wallets and devices are present.
- Access Data: In addition to devices, all access information such as passwords, usernames, and wallet pins should of course be listed in the estate plan. If any data is stored on a smartphone or computer, the corresponding login information for those devices also belongs in the estate plan.
- Backup: Especially the backup of a wallet with the recovery phrase (12 or 24 words) is significant for estate planning. These words can be used to restore the entire balance if the wallet is lost.
- Bitcoin Trust:. Since in most cases the inheriting persons are not familiar with Bitcoin, it is also worthwhile to define a trusted third person with the necessary know-how. This person should support the community of heirs in becoming familiar with the topic and should therefore also be mentioned in the estate plan.
Form and safekeeping
An estate plan does not exempt you from writing a will. In the will, you determine who gets what. The bitcoin estate plan ensures that the inheriting people get your digital asset.
Basically, the estate plan is a simple document. However, since it contains very sensitive data, you should keep it safe and protect it from environmental influences, such as water or fire. It would be advantageous to write on the paper with a pen and pencil and laminate it.
You can take precautions against fire with a fireproof folder or a safe. For safety, it is best to make a second copy. Put one in a safe place at home and the other in a safe deposit box or with a notary. However, be aware that you should trust these institutions, because you are dependent on them, which contradicts the ideology of bitcoin.
How do you inform the inheriting people?
In addition to creating and safely storing the estate plan, you need to ask yourself how and when you will inform the inheriting people. Either you can tell them the estate plan information personally, define a trusted person to take on this responsibility after your passing, or pass the information on via a will.
You don't like to deal with your own death. However, you should create the estate plan sooner rather than later. Once you have a solid estate plan in place, you can continue to invest, sleep sound, and move on to other bitcoin topics without worry.
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