Cryptocurrency, sometimes known as “crypto,” is virtual money that may be exchanged or used to pay for goods and services online. The original cryptocurrency and currently the most valued and well-known is bitcoin. At the same time, you should know the importance of crypto estate planning. And why you need to protect their digital assets.
Read on to learn more about digital assets. And why estate planning is important.
What Is a Digital Asset? Why Is Crypto Estate Planning Important?
Any electronic documents and data kept online, on portable devices and on home computers can be useful as digital assets. In simple words, anything you store in a soft copy is a digital asset including your digital estate planning documents.
To be more precise, all the following terms are considered as a digital asset:
- Email accounts
- E-commerce/marketplace accounts (i.e., Amazon, eBay, etc.)
- Photos saved online/on the cloud
- Social media accounts
- Online banking accounts
- Cell phone apps
- Online dating or gaming accounts
- Online subscription-based accounts
- Online chatroom accounts
- Online accounts for utilities
- Loyalty program benefits (i.e., frequent flier miles, credit card perks, etc.)
- Any personal data you save on your system, smartphone, or tablet
The liquid money held in the bank account cannot be regarded as a digital asset. But the underlying financial assets, such as electronic bank account statements, could be.
Another illustration would be cryptocurrencies. The account access platform (Coinbase, for example) would be a digital asset as well as the asset itself (Bitcoin, Ethereum, etc.), although not added to the estate.
There is never a better time to tighten up your account security and shield yourself from data breaches by weak or reused passwords. Since protecting your assets and digital heritage is crucial, it’s important to follow an estate planning tip. If you have a cryptocurrency investment, you should secure them through estate planning. Estate planning lawyers can ensure that you incorporate your digital assets in your wills and trusts. One in ten people now invest in cryptocurrencies, and protecting their digital assets is a must, which is workable, but it might have significant tax repercussions.
KYC (Know Your Customer) verification is a crucial process utilized by businesses to confirm the identity of their customers. It involves gathering relevant information such as identification documents, address proof, and other personal details to ensure compliance with regulatory requirements and to mitigate the risk of fraud or money laundering. KYC verification helps establish trust between businesses and their customers while safeguarding against potential risks associated with financial transactions.
10 Tips to Safeguard Your Digital Assets
Here are ten ways that can protect your digital assets with the help of estate planning:
1. Create a Detailed Inventory
Today, email is the common source of sending financial statements. And emails and their passwords are generally kept on computers, smartphones, or the cloud. So, electronic processing is useful for bills payment and tax return filing, and other financial operations because it can save you time and effort. In this case, social media accounts, digital music, video libraries, or digital images including movies are different assets with sentimental significance. Make a list of all your digital assets including their value, location, and access information. This inventory will help your executor and beneficiaries locate and manage your digital assets after your death.
2. Establish a Trust
A trust can hold your digital assets. And provide specific instructions for their management and distribution. So, this can help avoid probate. And make sure that your assets are distributed according to your wishes.
3. Create a Digital Will
Consider creating a digital will that outlines your wishes for your digital assets. This can include instructions for transferring ownership, access information, and other relevant details. You should create an estate plan if you don’t already have one. You can do this by creating a living trust or a last will and testament. Wills, trusts, and estate planning allow you to specify who will inherit your assets.
4. Use Strong Passwords
One of the most common pieces of advice in the digital age is to use strong passwords. You can avoid the agony of losing your investment by encoding your wallets. And use clever devices to deal with cryptocurrencies. Because your wallets can lock you out if you don’t have the right combination, choose a password you can remember.
5. Provide Clear Instructions
Make sure your executor and beneficiaries understand your wishes for your digital assets. So, try to provide clear instructions on accessing, managing your digital assets, and keeping this information up-to-date.
6. Take Notice on Digital Assets Management
Given the difficulties in gaining access to your assets, you should name an executor and trustees to ensure they can deliver according to your wishes. Make you have complete faith in the persons chosen for the position and that they know their duties are essential to the project’s success.
7. Choose a Reliable Executor for Crypto Estate Planning
Select an executor familiar with digital assets who will understand your wishes about their management and distribution because your priority is to protect your digital assets.
8. Use Secure Storage Options
Consider using a reputable cryptocurrency exchange and a cold storage solution to store your digital assets. Avoid keeping all your digital assets in one location. Plus, ensure that your executor and beneficiaries can access the storage options.
9. Use Multi-Factor Authentication
Set up multi-factor authentication on all your digital asset accounts to enhance security. And prevent unauthorized access which can be harmful for your privacy. It will help you to secure your assets with less effort.
10. Consult with a Professional
Consult with an estate planning lawyer who has experience with digital assets. They can guide with the best strategies to protect and transfer your digital assets to beneficiaries.
Conclusion
Creating a digital estate plan is crucial to ensuring that your assets are doing best. And it will also help in crypto estate planning. The above ten tips for protecting digital assets in crypto estate planning will make you a pro in this field. It will also help you to know who needs estate planning and why it is crucial.