None of us live forever, and with how much work and time we’ve put into our Bitcoin, it’s reasonable to ask: what happens to our BTC when we pass away?
The answer? It’s lost forever—unless you plan ahead.
That’s why creating an estate plan for your Bitcoin is the best way to ensure your next of kin can access it after you’re gone.
Square one: Protecting your seed phrase
The first step to creating an estate plan for your Bitcoin starts with your seed phrase.
A seed phrase, also known as your recovery phrase, is a sequence of random words that stores all of the data required to access your Bitcoin wallet. This is seen mostly on wallets that allow you to practice self-custody—the practice in which you hold both your public and private keys. If you haven’t heard about it yet or are actively looking for more ways to protect your Bitcoin, we recommend checking out this article on how to self-custody your Bitcoin.
Storing your seed phrase securely is the biggest step you can take to protect your Bitcoin for yourself and your beneficiaries. Here are a few tips on how to safely store your seed phrase:
- Write it down, make copies, and store them in different places
Keeping your seed phrase on paper is fine, as long as you make multiple copies and store them in different places. With paper being susceptible to elemental damage (like getting burned or wet) or easily being misplaced or lost, keeping multiple copies is crucial.
- Look into specialized storage services
Some services can engrave your seed phrase on durable materials like stainless steel while others can create nearly-indestructible capsules for the pieces of paper you write your seed phrase on. Although they can be a bit expensive, the protection they can provide makes them worth looking into.
- Store them digitally on a USB or hard drive
Storage systems like USBs or hard drives let you keep your seed phrase completely offline. They’re also affordable and accessible, unlike the specialized services mentioned above.
However, it’s worth noting that USBs and hard drives aren’t always designed to be secure, so if you plan on storing them digitally, we recommend using a drive that isn’t going to be used for anything else other than storing your seed phrase.
Making sure your beneficiaries have access
The next step to creating an estate plan for your Bitcoin is to make sure your beneficiaries will have access to the Bitcoin you leave behind.
There are a few ways to do this, but the first step should always be to decide who your heirs/beneficiaries will be and collect the information they’ll need to access your Bitcoin—seed phrase, login credentials to your online Bitcoin wallet, public and private keys, and any PINs they may need. Just remember to never put all of this information in the same place (because it’s never a good idea to put the lock and the key in the same place).
From there, one option you can take is to open a trust account, which allows a third party to manage all of the assets on your behalf in case of an emergency. There are even new elements of estate planning like Digital Protection Trusts (DAP Trusts) that take all of your digital rights and/or property into account—everything from your Bitcoin to email accounts and social media profiles. If you’re holding a significant amount of Bitcoin, look into opening a trust account.
Another route you could go is to have a last will and testament for your Bitcoin drawn. Doing so not only ensures that you have a legal say in who gets what, but also goes a long way in helping all your beneficiaries. If you plan on having a will drawn, make sure to name a digital executor (the person who takes the legal responsibility of managing your assets only upon your passing) and that your lawyer includes all the digital assets you want to pass on.
Without a will or a trust, your next of kin may still access Bitcoin through probate. However, this process can be expensive and the amount of Bitcoin your beneficiaries will inherit will be included in public records.
Not creating an estate plan for your Bitcoin essentially means you’re allowing it to disappear when you’re gone—so if you’re hoping to leave all your Bitcoin to someone you love and trust, you need to take concrete steps to make sure it happens. Whether it’s opening a trust account or having a will drawn, the choice is yours.