Taking control: What happens to your crypto after you die?


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QUICK TAKE

  • The unexpected death of Quadriga CEO Gerald Cotten has spurred questions about how we hand down our crypto after we’ve passed away
  • The Block spoke to Pamela Morgan, a crypto inheritance lawyer, about a three-step process to ensure your digital assets can be inherited
  • No, it doesn’t require an attorney – or giving your keys away

It’s not particularly pleasant – or even common practice– to think about your own premature death. But it’s vital that you do, according to crypto inheritance lawyer Pamela Morgan.

The wreckage left this month after the sudden death of Quadriga CEO Gerald Cotten has brought the conversation to the forefront after he took the exchange’s main encrypted private key to the grave. Reckless as the lack of safeguarding may seem, the Gerald Cottens of the world are not alone. According to Morgan, many crypto-wealthy individuals neglect to consider how their own (or their customers’) crypto is uniquely inaccessible without them, leaving their assets invariably trapped when they die.

She’s seen it first hand, regularly meeting families whose late relatives had failed to adequately plan, leaving their cryptocurrency in a state of limbo. Morgan is so passionate about death and crypto – her “two favourite subjects” – she’s written an entire book on it and trains lawyers and the public (occasionally pro-bono) on how to draft a “crypto inheritance plan.”

Morgan sat down with The Block to share her advice on planning for the unexpected and ensuring your chosen beneficiaries can access the assets that outlive you.

WHERE to start? An education.

Motivating yourself to focus on the admittedly gloomy subject of death is the first hurdle, Morgan says.

“Try not to frame it in terms of obsessing about your own death. Depending on how you look at it, it can be kind of fun. Think about it as leaving an incredible gift for your loved ones.”

She concedes that there’s also very little guidance available publicly, and said she’s not surprised people let it drop down on their to-do lists.

Next, it’s about tackling the misconceptions that exist around planning ahead, challenging the hyper-sensitives and even paranoia endemic to the crypto space

“Most people have this mistaken belief that having a plan actually makes your crypto assets less secure. What they think it is and what it is are two different things,” she says. “It is not giving your keys to a third party. It is not trusting a lawyer. It’s not something that you have to commit thousands of dollars or crazy time to.”

A playful slide from Morgan’s presentation, highlighting the issues.

It may be reassuring to know that the whole process can be completed independently, but it’s an unfamiliar prospect when it comes to our finances. “We are trained to not trust ourselves. Our whole lives, we are trained to have third parties. Getting over that hurdle is the biggest impediment,” Morgan notes.

Once over the mental barriers, you can begin what she reassures is an inexpensive process, devising a plan that suits you, “your technological knowledge, your home security, and your family situation.”

HOW to start? Write a letter to your loved ones.

Perhaps more difficult than educating yourself is ensuring your relatives get to grips with your crypto. Think about all the glazed-over eyes encountered at family dinners when digital tokens are discussed and you’ll appreciate why Morgan is so insistent on building the knowledge of those around you.

She says step one consists of a letter to your relatives, detailing your intentions and how to access, for instance, your multisignature private keys and where they are.

“Start with something doable. You literally go on your calendar, you mark off an hour, and you can take my [free] ‘letter to loved ones’ template and make it your own.” There, account holders can during their lifetime outline an access plan, noting key locations, exchange accounts, and access controls (PINs, passphrases, multisig requirements) set up as security precautions, as well as their asset portfolio. In doing so, you might even find wallets you’d forgotten about – as Morgan admits she did.

“You don’t have to give specific street addresses. You can say ‘one key is a Trezor at my Aunt Viola’s house,” Morgan clarifies, adding that the letter itself should be handwritten, stored in a safe and updated as needed.

“It does not have to be perfect. It will be better than what you have now – which is nothing.”

After the technical side, step two is dictating in a will who gets your crypto in the event of your death, taking care not to denote quantities in the highly-fluctuating fiat conversion. Otherwise, Morgan says, local law will dictate what happens to your assets – if they can access them.

Best case, if your crypto is stored on a reputable exchange, the firm will normally work with your loved ones to provide access to the account if you’ve laid out your wishes in a will. Eventually. However, she adds, the process is “not usually fast”, often requiring a court order for transfer. This also assumes you’re not using private keys, although Morgan strongly recommends them.

Step three, Morgan says, is to ensure this plan is understood by your trustees.

“We impute our knowledge onto our loved ones. Even when they do not share it…we believe they have the same knowledge especially if we’ve explained it to them.” Step two therefore requires a little practical exercise and cooperation, asking your relatives to pretend you aren’t there and attempt to actually access your crypto based on the letter.

“You will see the meltdown!” Morgan jokes. As a result, she advises users identify trusted individuals with “enough technical ability” who can oversee and walk your relatives through the process when the time comes. And she adds, don’t rely on attorneys to do the technical heavy lifting.

“Most lawyers do not have the requisite technical knowledge to actually physically access your crypto access. They don’t know what to do with a seed, they don’t know how to use a passphrase.” She clarifies however that those in “sticky situations” may need to meet with a specialised lawyer, typically at a cost of around $2,000-$5,000.

When to start? Now.

Don’t wait, Morgan urges. “This is really important. This is something that anyone who owns crypto assets has to do,” she says.

For the many millennials involved in crypto, Morgan says, it’s especially easy to neglect. “The younger you are, and the less experience you have with death or illness, the less likely you are to view this as a problem for you. It’s really easy to put off – it’s never at the top of your to-do list.”

But, in the wake of Quadriga’s downfall, it seems acting early can never come too soon – especially if a large amount of your net worth is in crypto. To be clear, the scale of the issue is unknown, with the likes of Coinbase unable to comment on the number of active accounts held by no-longer-living users. Morgan however seems convinced an access crisis is looming, and there is a universal need in the space for inheritance planning.

“Cryptoasset exchanges don’t know you’re dead. Accounts with no access are assumed to be hodlers,” Morgan explained.

Morbid as it may be, don’t leave planning your crypto-estate until it’s too late – think about the assets you will leave behind and an access plan for them. As Morgan says, “it might be fun.”

Note : For more information, Morgan recommends reading her book, Cryptoasset Inheritance Planning for a comprehensive guide, which can be partially accessed via creative commons.

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