How to Leave Crypto to a Beneficiary
More workers than ever are becoming aware of the potential of cryptocurrency. Not only are these investments a great way to make extra money, they can even be passed on to others.
Achieving this goal is easier said than done. Cryptocurrency is still a relatively new way of making money and is subject to ever-changing rules. If you’re not careful, you could expose your cryptocurrency to the wrong people.
Don’t jump straight into the murky waters of cryptocurrency. We’re going to break down how to leave crypto to a beneficiary in your living will or trust.
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Breaking Down the Basics of Cryptocurrency
It’s much easier to invest your cryptocurrency properly when you understand how it works. Cryptocurrency isn’t like traditional money in how it’s paid, saved, and invested.
While traditional forms of cash have their own issues around identity theft and fraud, cryptocurrency is in another ballpark entirely. The average cryptocurrency account still doesn’t have powerful security features, leaving users vulnerable to several issues. For example, giving your cryptocurrency password to the wrong person is enough to lose all your investment.
Working with a bank offers you some legal protection against theft. On the other hand, your biggest protection with cryptocurrency is your own common sense (as well as the changing rules of whatever platform you’re using).
How to Store Cryptocurrency Properly
If you’re thinking of storing your cryptocurrency, you already know about the function of a crypto wallet. These digital storage devices usually function through a third-party app or website, though you can also put them into a physical storage device.
Cryptocurrency adoption is on the rise, making it easier and more challenging to store your investments. There are two primary ways of storing your cryptocurrency:
Hot Wallets for Constant Activity
If you are constantly trading and purchasing various forms of cryptocurrency, you’ll need a hot wallet. These tools are very convenient for regular activity, but are more susceptible to fraud due to their Internet connectivity.
Another way to think about a hot wallet is like a traditional bank’s checking account. This cryptocurrency is designed to be moved, traded, and invested.
Cold Wallets for Constant Storage
Do you want to save your cryptocurrency for another time? Cold wallets are your best bets. These wallets earned their name for their similarity to how a freezer stores food in the long-term.
Does that mean cold wallets are flawless? Far from it. Cold wallets also have security issues due to the lack of activity. If your keys are compromised by your third-party platform or changing rules, you could lose your crypto forever.
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How Do You Find a Happy Balance for Crypto Storage?
There’s a middle ground between the hot and cold wallet. We highly recommend you use a blend of digital and physical tools to protect your investment.
Your cold wallet should have a backup in the form of an external hard drive. This drive needs to be put somewhere secure, such as a vault or safety deposit box. Make sure you store any passwords, codes, or PINs in a separate location in the case of a break-in.
However, we don’t recommend going crazy with your password locations. You need to make sure any sensitive information can still be recovered by you or someone you trust. If your recovery options are too complicated and spread out, you might sabotage yourself by accident.
Related: Introducing Unbanked Vault
Putting Cryptocurrency Into Your Will
Now for the part on how to leave crypto to a beneficiary. The function of a will is to designate assets and money to multiple parties upon your passing.
The type of will you need to make is called an estate plan. This document is vital for ensuring the right people receive the right assets should something happen to you. Your estate plan needs specific instructions on how to maintain and access assets, such as firmware updates or legal changes.
Make it as easy as possible for your beneficiaries to use your cryptocurrency investment. If you need help getting started, consider asking your potential beneficiaries what they find confusing about cryptocurrency. This information will make it easy to create better instructions.
Learning how to leave crypto to a beneficiary means understanding the volatile nature of cryptocurrency. The more you reconcile with the dynamic nature of this investment, the better off everyone will be.
Cryptocurrency comes in the form of hot and cold wallets. Depending on your activity, both wallets are useful in investing, trading, and storing investments. If you want to leave crypto to a beneficiary, your will should come in the form of an estate plan. This document will require specific instructions on how to maintain and access your crypto.
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Don’t leave your investments up to chance! We recommend getting started as soon as possible. The sooner you begin parsing out your cryptocurrency, the more peace of mind you’ll have.
Do you still need help with investing or assigning your cryptocurrency? Contact us today for fast financial advice!