Life is unpredictable, and unforeseen cases can leave families not just grieving but also with the responsibility of managing a loved one's possessions. This makes inheritance planning, also known as estate planning, a critical step in ensuring that all assets, physical, financial and digital, are passed to the nominee without difficulties. With the growing popularity of digital assets such as cryptocurrencies and NFTs, inheritance planning is necessary.
What is Crypto Inheritance
Crypto inheritance is the process of ensuring that digital assets such as cryptocurrencies and NFTs are passed down to chosen heirs or nominees following the investor's death. Since there is no formal nominee system for crypto in India, investors must take extra steps such as such as private keys or seed phrases, and ensuring there is a clear, secure method for beneficiaries to access these assets in a will to ensure these assets can be securely and legally transferred.
What Happens When There's No Nominee for Your Crypto
When a cryptocurrency owner dies without revealing critical access credentials such as private keys or seed phrases, heirs are frequently unable to access the assets, risking permanent loss. Edul Patel, Co-founder & CEO of Mudrex, says:
"It is estimated that around 3.7 million Bitcoins are permanently missing due to investors losing access to their assets. Even with court orders, most platforms will not release crypto assets without passwords or keys. In India, where there are no defined nominee procedures or inheritance laws for cryptocurrency, the risk are considerably higher. This emphasises the need of having a clear inheritance plan with documented access."
Is It Legal to Inherit Crypto in India?
Cryptocurrencies like Bitcoin and Ethereum are not recognised as legal tender in India, but they are not considered illegal either. Under existing tax laws, they are classified as Virtual Digital Assets (VDAs) and are treated as property for taxation purposes.
As such, like other movable assets, cryptocurrency can be transferred to legal heirs through a will. In estate documents, such assets are often classified as digital assets, which can also include NFTs, digital wallets, and other types of online property.
While there are no specialised inheritance rules or nomination systems for cryptos, the actual transfer process can be complicated, particularly when access credentials are not available.
Steps to Safeguard Your Crypto for Inheritance
These steps are based on insights shared by Edul Patel, CEO of Mudrex.
Make sure to include your crypto holdings in a will that is legally binding by naming the intended beneficiaries.
Provide detailed written instructions on how these assets can be accessed, including information about the location of private keys, seed phrases, or wallet credentials.
Ensure that any essential access information is securely stored in an encrypted digital file, a safe or other secure physical location.
To ease asset recovery for your heirs, consider reputable cryptocurrency platforms that include shared access features such as multi-signature wallets or inheritance tools.
