More Americans are investing in cryptocurrency and non-fungible tokens (NFTs). If these people lose their passwords, they may lose access to their accounts – possibly forever. As more people buy crypto, this is becoming a significant concern in estate planning.
Holding Crypto and NFTs
MarketScout says that 13% of Americans says they trade bitcoin, ether, other another cryptocurrency in the last year, according to a survey from the National Opinion Research Center. Influencer Marketing Hub says that nearly 40,000 people purchased NFTs in March 2021.
Cryptocurrencies are digital currencies that are recorded on a decentralized system. This digital currency needs to be kept in a digital wallet. NFTs are similar, but they are one-of-a-kind assets, and they can also be stored in a digital wallet.
Investopedia explains that digital wallets can be hot (online) or cold (offline), and that cold wallets are considered more secure. To access a cold wallet, you need a private key. This is essentially a password.
Billions of Dollars Have Been Lost
When people forget their key, they risk losing their crypto forever. The Motley Fool says this has happened to a man named Stefan Thomas. He received 7,002 bitcoins years ago, back when one bitcoin was worth a few dollars. He put the bitcoin in a digital wallet. Then he lost the password.
The New York Times says that about 20% of the 18.5 million existing bitcoin have been lost or stranded. That was worth about $140 billion when the article was written in January 2021.
Crypto and Estate Planning
People can lose access to their crypto in a number of different scenarios. In many cases, people acquired crypto when the value was low and simply forgot about it over the years.
Access can also be lost when someone dies. Imagine a man who has a significant sum of bitcoin. He might not tell anyone because he’s worried about hackers. Then he dies unexpectedly. His family doesn’t know about the crypto, so they never try to access it. The crypto is lost forever.
Or maybe someone in the family does know about the crypto, but they don’t know the key. They look for it but are not able to find it. Again, the crypto is lost forever.
Securing Your Crypto for Future Generations
Estate planning can help you pass your wealth onto the next generation, and it’s as important for cryptocurrency and NFT investments as it is for other assets.
If you own any cryptocurrencies or NFTs, it’s important to include these assets in your estate plan. You need to make sure that your heirs will both be aware that the digital assets exist and know how to access them.
An experienced estate planning attorney can help with your NFT and cryptocurrency estate planning needs. Need help? Contact Skinner Law.