Cryptocurrencies Inheritance Planning

Cryptocurrencies Inheritance Planning What will happen to my cryptocurrencies when I die? This guide will give you some advice to create a cryptocurrencies inheritance plan, so you can distribute your cryptocurrencies after your death. These are the main goals: Allow your heirs to take possession of your cryptocurrencies when the time comes, but not before. Minimize the risk for anyone to steal your cryptocurrencies before you distribute it to your heirs To achieve that goal, you need to write an access plan and let your heirs know about it. It will be a letter including the following information: who can help them, where to find the assets, which devices they should preserve, and where to find more information. Access Plan You will need to write a letter, an access plan, so all your heirs will know which assets you have and the instructions to access them once you die. If you are not tech-savvy, it would be better to write this access plan with pen and paper. We assume that your internet-connected devices have a virus, or will have one someday. If you feel confident about your technical knowledge, you can write the letter on your computer, but not your keys or sensitive information. Just leave blank spaces for all the sensitive information and write it with a pen after printing the letter. Here you can find a template of the letter with the access plan: Selecting Helpers Your heirs will probably need help to access and securely transfer the assets. So, it’s a good idea to designate at least 2 helpers. Two people can watch one another. A perfect helper is trustworthy, highly technical, great at explaining complex concepts, isn’t afraid to ask questions, can self-educate and learn quickly, and has no interest in stealing your assets. Design people with strong values, and who are unlikely to develop an addiction to drugs, gambling, etc. If you don’t have three people like that then think of lawyers and/or organizations that might be able to oversee the process. They need to be reasonably tech-savvy and should have some training on cryptocurrencies. They are called “Fiduciary Helpers”. Take into account that selecting an heir to be your helper puts him in a position of power over your other heirs, which may or may not be okay for your particular situation. For each designated helper, your access plan should include: the full name a photo contact information: address, email, phone number, online profiles, etc Contacting your helpers and letting them know they were selected is a good idea. So you have the opportunity to educate them about your plans and assets. The downside of letting them know is that if they are not trustworthy, they could use the opportunity to learn about your holdings and plan to steal them. So, you will need to consider how much information you share with your helpers. Asset Inventory In your access plan, you need to list all your devices, software, passwords, and backups needed to access your assets. Don’t forget to include the location of each item. If you have the proper backups, they won’t need to access your phone and computer to claim your assets. Hardware Wallets For each hardware wallet, you need to include instructions to access: the physical device the PIN the pass-phrases the seed phrases backup All of them should be located in different places, to increase your security. The PIN, pass-phrases, and seed phases should have a reference to the hardware wallet they belong to. Including a photo of the hardware wallet in your access plan is a good idea, so your heirs can easily locate it. You should also include a list of all the tokens you have in each wallet. Hot Wallets For each hot wallet (mobile or desktop wallets), you need to include instructions to access: the seed phrases backup the password/passphrase (if required by the wallet) the wallet software name You also should include a list of all the tokens you have in each wallet. Exchanges For each exchange you use, you need to include: the exchange name the credentials and instructions to access the exchange You also should include a list of all the tokens you have in the exchange. Separation of Powers If you are going to distribute the access plans and all your keys to other people, they will be able to misappropriate the assets. So, instead of trusting a single person with the keys, you can divide the key material into pieces and require more than one person to come together to unlock the crypto assets. These are some good methods for dividing control Multisignature With Multisignature, more than one key signature is needed to transfer the asset. The most common multi-signature scheme is 2-of-3, where three signatures are designated as “authorized” and any two of those authorized signatures are required for a transfer. One big disadvantage of a multi-signature scheme is that it’s not widely available for all coins and tokens. Passphrase Passphrase is an optional feature of hardware wallets that allows users to create hidden wallets. Passphrases serve as a function of second-factor protection of the recovery seed and are an ultimate protection against attacks involving physical access to the device or the recovery seed. Passphrase on TrezorMost Hardware Wallets (like Trezor or Ledger) have support for passphrases. You could distribute your seed phrase to one person and the passphrase to another. So, both keys are needed to access your wallet, instead of one. Shamir’s Secret Sharing Shamir’s secret sharing (SSS) is a cryptographic technique formulated in 1979 by the Israeli cryptographer Adi Shamir. The essence of Shamir’s scheme lies in the ability to back up, share and recover a secret by breaking up the secret into multiple shares that are individually useless and leak no information about the secret or the scheme setup. You can choose how many recovery shares you want to generate, and decide how many of them you want to use for recovery. Individual shares do not leak any information about the shared secret, as long as the number of compromised shares does not reach the required threshold. For example, if you use a 3-of-5 scheme and 2 of your shares get compromised, the attacker has no chance to reconstruct your wallet and cause trouble. Applying Shamir’s secret sharing to your seed phrase is a good idea because it increases your security and also gives you the ability to better support inheritance planning. You can distribute the shares to different people or store them in different locations (and let your heirs know the locations). Trezor Model T is the only hardware wallet, currently supporting Shamir Backup. You can buy it here, using our affiliate link to help us to support this publication. Here you will find the official Trezor site, presenting the Shamir Backup feature: And here you have two Trezor blog posts talking about the subject: Shamir’s Secret Sharing + Passphrase The combination of Shamir’s Secret Sharing Backup + Multiple Passphrases gives you strong security. You can see more details about this topic in our previous post: Storage location It’s important that your access plan should be located separately from your key material (seed phrases, PINs, passphrases, etc) You should store multiple copies of your access plan and key material in different secure locations, preferably waterproof, fireproof, and access-controlled. Common secure storage options for home include a locking file cabinet, personal fireproof/waterproof safe, or a gun safe. Common secure locations outside the home include a bank safe deposit box, a vault in your hometown, a vault outside of your county or state, a vault overseas, your attorney’s office, your accountant’s office, a relative’s fireproof/waterproof safe, or a fireproof/waterproof safe at your office. Here you have some good safe boxes: Tamper Evident Seal It’s important to use any kind of tamper-evident seal, so you will have a quick way to know if other people are peeking at your plans or key material. You can buy some tamper-evident security stickers here: Or maybe you could just buy these tamper-evident bags, which are also waterproof: It’s important to sign the bag or the envelope you used so that you or your heirs will know if someone tampers with the envelope, for example, to read it or replace it with a new one. Location Chart You might want to keep a separate storage location chart and leave locations out of your access plan and key material. Keep it in a separate and secure location but remember your heirs will need access to this information too. Educating Your Heirs If you trust your heirs completely, they have enough age and are capable to understand technical concepts, then could be a good idea to educate them. You can teach them about your access plan and all the needed concepts to access your crypto assets when you die. Keeping your plan up to date As time passes, things change: your assets, technology, relationships with your loved ones and helpers, and the quality of your storage locations. You have to find the right balance between the effort required to refresh your plan and the urgency of the refresh. Creating a calendar reminder every 6 months could help you to regularly check if your plan needs an update or not. It’s recommended to include the Last Update date on the access plan letter. Every time you update your plan, you refresh that date and replace the copy on your home. If your other locations are not close, you probably are not going to have all the access plan copies always up to date. Just let your heirs know about that, so they try to find the freshest version of your plan, before following its instructions of an old copy. Dead Man’s Switch A dead man’s switch is a switch that is designed to be activated or deactivated if the human operator becomes incapacitated, such as through death, loss of consciousness or being bodily removed from control. Even though a dead man’s switch isn’t recommended for transferring your crypto assets, it might be useful to communicate information that’s not confidential. Google has made the dead man’s switch a feature of Google accounts through the Inactive Account Manager feature. Once you set it up, Google gives you the option of deleting your account, allowing trusted people to download your data from some or all of the Google services you use, or simply sending a message to a trusted person. Here you can read more about that Google feature. Sources This incredible book from Pamela Morgan is a clear blueprint to inheritance planning for those holding cryptocurrency, tokens, crypto-collectibles, and other crypto assets. The expert Andreas Antonopoulos helped to write that book. He talks a bit about it in these two videos: Pamela also offers a workshop here: And wrote some interesting articles about this topic: Here you can see Pamela at ETHDenver 2019