Author: Ye Yang
Since Satoshi Nakamoto released the first Bitcoin software in 2009, virtual currencies have undergone significant development, standing the test of the market and transforming from a niche speculative project into a popular investment option. Today, virtual currencies are favored for their characteristics of decentralization, anonymity, and global reach, leading more and more people to consider adding a portion of virtual currency investment to their asset allocation. However, the advantages of decentralization and anonymity can turn into disadvantages when it comes to a particular issue—inheritance.
Before Death—Wallets and Private Keys
To pass on cryptocurrency as a virtual asset, the most important thing is to make arrangements early in life.
In the generally anonymous and decentralized world of virtual currencies, wallets and their core private keys serve as the identification in this realm. Conversely, as long as the wallet and private key are entrusted to someone else, inheritance is effectively completed.
A wallet is an application for managing virtual currencies, and mainstream wallets are divided into PC wallets, browser extension wallets, mobile wallets, and hardware wallets. For the first three types, it is essential to clearly communicate the type of wallet to the heir, while for hardware wallets, it is crucial to keep the hardware device safe to ensure it can be transferred to the heir intact.
The private key is akin to a combination of a username and password for logging into the wallet. In practice, the private key is often converted into a mnemonic phrase, and when passing it to the heir, it is necessary to ensure the accuracy of the mnemonic phrase. If there is a password involved, the method of using the password must also be communicated.
So, what methods can be used to convey the wallet and private key to the heir? Inheritance is ultimately just insurance; informing the heir in advance may prevent some avoidable losses and disputes.
1. Paper and Pen Transfer
You can write down the type of wallet (if it is a hardware wallet, then the wallet's location), mnemonic phrase, and other information on paper, and then place it in a safe, similar to the commonly used paper wallets in the crypto community. You can put the safe's password in the will or directly store the paper wallet in a bank safe, ensuring that the heir can only open the safe after the inheritance.
2. Hardware Storage
You can also save the necessary information for inheritance on a USB drive or external hard drive, set a password for protection, and keep the hardware and password stored separately, ensuring that the heir can only access the information on the hardware after the inheritance.
3. Disability Switch
You can look for disability switch applications, such as the Sarcophagus project built on Ethereum and Arweave. Specifically, you can upload the necessary information for inheritance in the application, which will encrypt it and permanently store it on the network. Meanwhile, you need to set a file decryption time and designate your heir as the recipient. Before the decryption time arrives, you can choose to extend the file's storage time or terminate the service; otherwise, the file will automatically decrypt for the recipient.
Each of the above methods has its own advantages and corresponding risks, so please choose the method that suits you for passing on your virtual assets.
After Death—Centralized Platform Accounts
If you did not have time to leave behind a wallet and private key during your lifetime, there is a significant possibility that the virtual assets cannot be inherited, as decentralization is a fundamental characteristic of virtual currencies. However, after many years of development, centralized exchanges have emerged in the world of virtual currencies, sacrificing a certain degree of decentralization and anonymity in exchange for some security and convenience. If the deceased primarily used a centralized exchange account to manage virtual assets, the heir can inherit the virtual assets simply by knowing the account name and filing a claim through the platform.
The inheritance process may vary across platforms, and the required materials differ as well. This article will take Binance as an example to explain how to inherit virtual currencies from a deceased person's account.
Binance has a complete inheritance claim process. After the heir registers their own account, they can inform customer service that they are the heir and need to inherit the estate, and they can directly access the inheritance claim page through the AI customer service link.
The required materials are not complicated. In addition to the information of the deceased's Binance account, the heir also needs to provide the following three items:
Identification documents of both the heir and the deceased;
Death certificate of the deceased;
Will, inheritance rights notarization, and other legal documents proving the right to inherit.
The above three items need to be notarized or certified by a lawyer, and an English translation should be attached.
The third item can be particularly troublesome because by the time the inheritance claim process is reached, it is often the case that no will was left to handle the virtual assets. If there is no dispute regarding the inheritance, the heir can go to the notary office to obtain an inheritance rights notarization, which generally requires the deceased's death certificate, proof of kinship, personnel files of the deceased, property certificates, and other materials. If there is a dispute regarding the inheritance, a lawyer will need to be commissioned to conduct inheritance dispute litigation, and the final effective judgment will also serve as a legal document proving the inheritance rights.
After submitting the above materials and passing Binance's review, the heir can inherit the virtual currencies from the deceased's account into their own account.
Summary by Lawyer Mankun
Virtual currency is an asset with a high threshold for ownership. You may have avoided market volatility, hacker fraud, legal risks, and accumulated a considerable amount of virtual assets, but your family may know nothing about virtual currencies. In extreme cases, it is even possible for an investor to pass away without their family or heirs knowing that the investor held virtual assets; or they may only know that the investor was involved in virtual currencies but have no idea what wallet was used or on which platform; or they may follow the clues left by the investor to access virtual currencies but encounter issues during the withdrawal process, leading to disputes.
Therefore, effective communication within the family is crucial. Lawyer Mankun suggests that you hold family meetings regularly to explain the operation principles, value, and management of virtual currencies to your family. Through education and communication, you not only leave behind a virtual asset for your family but also impart your investment philosophy and management skills, which is key to ensuring the smooth inheritance of virtual assets.
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