Securing Your Bitcoin Legacy: A Guide to Inheritance Planning

Introduction

As a Bitcoin owner, it’s crucial to recognize that, like any other asset, Bitcoin cannot be taken with you after death. If your private keys are inaccessible, your Bitcoin holdings can be lost forever. According to Chainalysis, an estimated 20% of the total Bitcoin supply is already lost, and poor inheritance planning might be a contributing factor. One of the many services Florin21 provides is inheritance planning to help avoid such losses. Let’s discuss the importance of securing your Bitcoin legacy.

Challenges of Passing on Bitcoin

Unlike traditional financial assets, Bitcoin is based on self-custody, meaning there’s no bank or asset manager to recover funds in case of death. Bitcoin can be stored in hardware wallets, online wallets, or centralized exchanges. The responsibility lies solely with you to ensure its safe passage to your chosen heirs.

Many people buy Bitcoin intending to pass it on to future generations. So, how can they ensure a smooth transfer to the next wave of HODLers?

Imagine you’ve accumulated a substantial amount of Bitcoin, intending to pass it on to your children. Without proper planning, they might face insurmountable challenges in accessing these assets, leading to potential financial loss.

Your Will and Testament

Similar to traditional assets, Bitcoin beneficiaries should be identified in your will. You can also nominate a guardian to access private keys without inheriting the actual Bitcoin. However, assigning your solicitor as a trustee for your Bitcoin isn’t recommended due to regulatory hurdles.

Including details about your Bitcoin holdings in your will isn’t mandatory, especially if you’re concerned about hackers targeting your heirs. A useful strategy is listing the percentage of your inheritance each beneficiary will receive instead of specifying the specific amount. Since wills become public records, specifying Bitcoin could attract problems.

How Much Information Should You Share?

Educate your family about your Bitcoin holdings and how to access them. Include these instructions in your will or share them with your solicitor. Bitcoin stored on exchanges functions similarly to traditional bank or brokerage accounts, and standard probate procedures will likely handle it.

For easier access, you can register your beneficiaries as secondary account holders on exchanges. However, some might prefer not to grant joint custody access. In such cases, beneficiaries can still recover funds through probate by providing a death certificate, probate documents, and self-identification. Due to counter party risk, we do not recommend ever leaving your Bitcoin on exchanges.

Balancing Security and Accessibility

Sharing seed phrases, which unlock your Bitcoin wallet, presents a challenge. Increased security measures while you’re alive can make it difficult for heirs to access the Bitcoin after your passing. Florin21 works closely with businesses and individuals to develop tailored solutions with the focus on finding a balance between security and recoverability.

Securing Your Bitcoin for Heirs

Never store seed phrases online. Use physical documentation stored in a secure location, such as a safe or secret location. For added durability and long-term preservation, engrave your keys onto metal. Services like Cryptosteel offer solutions for durable key storage.

Advanced Options for Secure Access

Consider using encrypted email services and encrypted password managers to deliver key information to beneficiaries upon your death. The key is not to provide too much information from or to one source.

Multi-Signature Multi-Location Wallets: The Epitome of Security

Multi-signature cold wallets in multiple locations offer the highest security.

These wallets require at least two out of several unique keys to access the Bitcoin holdings. Ideally, the location of one or two keys would be provided to your heir; additionally, a recovery key would be held by the wallet provider, and another key would be stored in a secure location.

Multisig providers like Casa and Nunchuk not only eliminate a single point of failure but can also share your recovery key with designated recipients after your passing. Bitkey allows you to add trusted contacts to help with key recovery.

Without proper planning, beneficiaries might struggle to locate your Bitcoin holdings. Florin21 works closely with clients to ensure a seamless transition with Bitcoin inheritance. This service is crucial for individual investors and businesses with Bitcoin on their balance sheets if there is a change in ownership or structure within the company.

Alternative Security Option

If you don’t have a multi-signature wallet, consider adding a passphrase to your existing wallet. This functions like a second password for your seed phrase. You could give your solicitor the passphrase and your heir the seed phrase. Even if the seed phrase is lost or stolen, it nevertheless becomes unusable without the passphrase.

Sharing the Responsibility

The key is to distribute access responsibility without giving anyone all the information required to access the Bitcoin. This ensures a secure and recoverable plan for your Bitcoin holdings after your passing. This takes detailed planning.

Customized Inheritance Planning

Every day, more and more Bitcoin inheritance plans are being created between Bitcoin HODLers and solicitors. At Florin21, we believe it’s vitally important to have an inheritance plan when self-custodying Bitcoin in case the worst should happen. Given the unique nature of each individual’s situation, there is no one-size-fits-all approach to Bitcoin inheritance planning. Consequently, Florin21 strives to meet each client at their level of knowledge and increase their confidence while providing all the technical support and guidance needed.

Now consider a family where the father, a seasoned Bitcoin investor, worked with Florin21 to create a robust inheritance plan. Upon his unexpected passing, his heirs were able to access and manage his Bitcoin holdings seamlessly, thanks to the tailored plan and guidance provided by Florin21.

Conclusion

You must engage in proper inheritance planning for Bitcoin to prevent losing your digital assets forever. By securing your private keys and educating your heirs, you can ensure a smooth and secure transfer of your Bitcoin. Florin21 is here to assist you in creating a comprehensive and secure inheritance plan tailored to your needs.

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