Too soon? Perhaps you’ve only just started purchasing a little bit of cryptocurrency here and there. It might not be worth much now – but just imagine what it could be worth in the future. Like any investment you might be holding on for the long term, and the greatest value might be realised in years if not generations to come.
That’s pretty straightforward if you own assets such as property, savings accounts, or stocks and bonds. You make a Will designating your preferred heirs, disposing of your earthly goods in whatever distribution you see fit. That document gets witnessed and stored for the future, and your instructions can then be carried out by the appropriate professionals when the time comes. Deeds and documents are signed over legally to their new owners, and bank accounts are transferred to their new signatories.
What about digital assets?
Nowadays though, for many of us, increasing proportions of our assets exist wholly in digital form. And it’s something we don’t give nearly enough thought to. Whilst we are encouraged at various points in our lives to make a notarised Will, we are rarely triggered to sit and think about what happens to all the things we consider to be of value, but which don’t exist in physical form.
Social media sites like Facebook are increasingly developing tools to help us express and manage our preferences for our profiles after we pass on, and there are legacy-based tools for the storage of files and photos now. Inevitably commercial services are turning on to the reality that our intangible digital things have value to us and potentially to others, after we’re no longer around to enjoy them. This is spawning whole new industries in its wake.
But when it comes to cryptocurrency assets, there are two main drawbacks to consider. The first is the general lack of wide adoption and understanding, and the second is paired vulnerabilities inherent, within the facts that anyone who has access to your private key can access your funds – and if they are lost, then nobody can.
If you die, will your private keys die with you?
That’s what happened to Matthew Moody, a Bitcoin miner and investor in his 20s, who died unexpectedly in an accident in 2013. His family don’t even know what his holdings were worth, never mind how to unlock them – and there is no authority they can appeal to, to try and set this right. I cannot help but wonder how many people around the world, have how many coins tied up in safe places that only they even know about, never mind how to use – that would also be lost forever, if they weren’t around to access them.
That’d be a bad situation for sure. But if you are the only person in your immediate trusted circle who has any idea what cryptocurrencies are or what to do with them, you’re left with something of a dilemma. Because you can’t lodge your keys or recovery seeds with anyone you don’t trust 100%, given that they can unlock your wallet at any time – certainly without the courtesy of waiting for you to shuffle off the mortal coil.
(Incidentally, the only reference I have been able to locate for recovery of cryptoassets by next of kin has related to funds stored on an exchange – which is something we generally advise that you do not do as a long-term strategy. But in the event of your death, exchange-based funds not only have the keys held elsewhere, there is probably an audit trail connecting you as the deceased purchaser with those actual codes. Exchanges are reluctant to discuss procedures for this, for obvious reasons).
Instruct your heirs!
My mother has no real idea what she would do with the handwritten list of words I once solemnly handed her, with the injunction to store them in a very safe place. She knows they’re important, and in the event of my untimely death can only I hope she’d find somebody who could help her unlock an asset she’d have no idea about how to make use of – but which someone could help her access and cash out. Meanwhile for me it makes sense to have an offsite back-up, many miles away from my hardware wallet, (and that was my main reason for this strategy in truth, rather than considering my own demise).
And my life-partner has been walked through the passwords and processes for accessing that wallet as well, because whilst our formal witnessed legal commitments to one another include our mutual wishes in respect of our children, property and traditional financial assets, that little USB stick would simply come under the heading of ‘personal effects’ in legal terms. Never mind that one day – (“this time next year, Rodders!”) – that little stick could be a meaningful legacy in its own right. Incidentally if cryptoassets are NOT specified individually in a will, they could literally be subject to ‘probate by truck’, wherein a relative (or anyone else who might have some vague claim) who recognised them for what they were – for example, in the form of a paper wallet – could probably have a good case for simply collecting them from amongst your other ostensibly worthless bits and pieces.
So how do you truly secure your keys, so that the right person could make use of them if you could not, but they cannot be maliciously accessed in the meantime?
Well, you could do something complicated using encryption, like PGP, to encrypt your private keys themselves – but this would layer on an additional barrier for your hypothetical bereaved relative to struggle through of course. You could also consider creating a multi-user plan – so if your recovery seed consists of 12 words, you might entrust 4 words each to 3 separate trusted individuals. They would at least have to get together and agree that you were dead (or that they were going to collectively rip you off regardless – so choose with care!).
The main thing is to think about it, and make a plan. Investing for the future is a fine idea, but no one really knows what that future holds. So why not set your mind at rest, and make sure your nearest and dearest know how to unlock your cryptoassets without you, if they ever had to do so?