Solving The Huge Problem Of Digital Assets' Wealth Transfer-Part I

Anything online whether business, financial investments (crypto wallets, mutual funds, stocks and shares etc.), cloud storage, emails, social media accounts, websites etc. are called digital assets. If you are earning or saving through digital assets, you would want to pass it on to your family to secure them financially,  in case you are no longer around them.  It should definitely be a part of your estate planning.

1. The largest transfer of wealth in human history is about to happen over the next couple of decades ($16 T) 
2. Rapidly growing digital asset portfolio: cryptocurrency, NFTs. Web 3.0 and metaverse are only going to explode this problem 
3. Covid and burnout induced early deaths (the 30s and 40s) leaving dependants without clear access to the above assets 
4. Only 1 in 5 consumers have someone in their life who knows all of their passwords and account details, 
5. Will consumers be prepared to pass on digital assets, or will billions in virtual goods be stuck in the ether? Of the existing 18.5 million Bitcoin, around 20 per cent — currently worth around $140 billion — appear to be in lost or otherwise stranded wallets, according to the cryptocurrency data firm Chainalysis

‍Problem 1: Why do current systems not work for Crypto account wealth transfer between generations? 

Today, an executor can do due diligence by calling financial institutions to double-check whether the person held accounts and get access to those funds, which typically requires providing copies of the Will and/or death certificate. 

However, with digital assets, it’s not as simple as calling the bank and finding out a relative had a valuable NFT. There’s no directory or central body that governs NFTs or cryptocurrency — it’s purposely decentralized, which is great for privacy but less than ideal for family members who want to figure out if someone held valuable digital assets.

‍Problem 2: Simply knowing whether the deceased has digital assets is NOT sufficient— it’s about knowing how to access them. 

A recent study from AssetVault, commissioned by our Indian brand AasaanWill, showed that consumers under 35 are way less likely to have shared account access with loved ones (20% of those under 35 have shared account info, compared with 35% of those over 55). 

This makes sense, since the younger you are, the less likely you are to think about passing on assets after you die. But this tech-savvy younger demographic may leave their families in the lurch if something happens.

2021 has been pretty hard with several millennials from the tech space passing away due to Covid and other work-related stresses.

‍So what can consumers do to ensure their digital assets are protected?‍

1. Use a password manager like 1Password — which can store all of your account information, logins, private keys to digital assets and any other key information — and share the master access password with your executor or store it with your will.

• But sometimes Crypto exchanges prevent users from sharing their passwords with others in their terms of service, and privacy laws in some jurisdictions prohibit account holder impersonation

• This is further complicated by accounts increasingly requiring two-factor authentication, which may not be easy to confirm if executors don’t have access to the person’s smartphone.

1. Use a digital wallet or exchange to store your digital assets — if your family has access to that, it may also include access to your private keys, depending on the wallet’s features, or the exchange itself may have a death-management process. For example, Coinbase clearly outlines what an executor or family member can do to retrieve digital assets in case of the death of the account holder. As a backup, you can store your private key on a physical piece of paper and ensure it’s stored in a safe deposit box, fireproof safe or another safe place your executor can access in the event of your passing.

1. Create an up-to-date list of your assets that your executor and/or key family members have access to — this should include physical and digital assets, and should be reviewed and updated either annually or when you acquire a new asset or change financial institutions. 

1. Finally, create a will that clearly outlines how you want your assets to be distributed and provide specific instructions on how you want digital assets to be distributed. Not only is this best practice to protect your assets of any kind and to appoint key roles like guardians for minor children, but it will also likely be required in order to release any account contents (for example, Coinbase requires a copy of the will as part of its process to release funds to an estate).

‍AasaanWill helps Indians protect their crypto assets safely and provides legally valid documents to ensure a smooth transfer to the next generation.  Our mission is to protect your assets today and tomorrow. 

In our next blog, we’ll talk about how your executors and beneficiaries access these digital assets, especially your Demat accounts and crypto wallets.

Banks, Crypto exchanges, fintech and neobanks are all going to be adding ‘death management protocols for the benefit of their customers. But until that happens, using AasaanWill can ensure your assets go to the people or organizations you want them to — and that they won’t be stuck in digital limbo. 

AasaanWill. Zaroori Hai!