As more and more people buy these assets, cryptocurrencies and non-fungible tokens (NFTs) are taking up more space in the investment sector.
Digital assets must be included in an estate plan to pass to loved ones after death, just as traditional assets.
However, using crypto and NFTs to secure, transfer, protect, and donate family money might be difficult. To meet the need for family planning and tax planning with these kinds of assets, new approaches are there.
Currently, there are a wide variety of cryptocurrencies and NFTs.
Bitcoin, Ethereum, Binance Coin, Tether, and Solana represent a large percentage of the trillion-dollar market.
An NFT is a rare, collectible, tradeable digital commodity on the blockchain that you can buy through bidding on an NFT marketplace.
For instance, you can buy real estate and virtual land with NFTs. Someone spent $450,000 in November 2021 to live next door to Snoop Dogg in the metaverse. NFT sales increased significantly to more than $17 billion in 2021, indicating a rising interest in these collectibles.
Accessing cryptocurrencies requires a private key, a string of alphanumeric letters only the owner knows.
The existence of the cryptocurrency, where to find the assets, and what to do with them must be known to your family or fiduciaries.
Sharing the seed phrase and private keys with your fiduciary is one approach. Placing your crypto-assets and NFTs in custody, such as a software programme or hardware wallet, is another choice for safe tracking.
Coinbase, BlockFi, Casa, Unchained Capital, Anchorage, and Genesis are among the companies that provide custodian services for digital assets.
Traditional solutions include making a calendar of digital assets for your fiduciary and detailing login procedures for each bitcoin exchange account.
Similar to passwords, personal keys are there to access NFTs.
This data can be retained in a digital legacy, an up-to-date inventory of your digital assets with passwords and other access details.
Ensure the fiduciary has access to the NFT and cryptocurrency ownership information, including private keys and passwords to digital wallets. Otherwise, the cryptocurrency and NFTs could be lost forever.Working with an NFT Marketplace Development Company is another option.
- Opening bitcoin accounts and NFTs in the name of a revocable or irrevocable trust is currently challenging.
- You can try to name a trust as the beneficiary of your account or use wallets that let you open an account in a trust’s name.
- This option is only accessible if the business in charge of your account permits it. Our clients have generally had trouble designating beneficiaries for cryptocurrency accounts as of the writing of this article.
- Your cryptocurrency accounts will pass as a portion of your probate estate under your will if there is no trust account and no designated beneficiary.
- Make sure that the fiduciary managing your estate has access to digital assets in your will, trust, and durable power of attorney.
- Your state should adopt the UFADAA or RUFADAA (RUFADAA).
- It is simpler for your loved ones to handle your digital assets during incapacity and after death thanks to UFADAA and RUFADAA.
I’ll talk about digital art now. Today, there are numerous instances of non-fungible tokens, or NFTs, being built using blockchain technology. An NFT is actually a token, a substitute for any digital creation kept there.
It may be a text file (such as a contract, deed, vote, or poem), a video file, a text file (such as a JPEG photo), or any number of seemingly unalterable digital creations.
An NFT, however, only has value in trade for other NFTs or cryptocurrency coins, not in its own right.
If I buy an NFT digital artwork for one Bitcoin today (Bitcoin is $38,686 a coin as I type this), the seller can sell it promptly for cash or store it in hopes it will trade higher later.
Three Dumb Crypto Mistakes
Making Your Seed Phrase Public and Being Scammed
The evil always accompanies the good. Hackers and con artists are everywhere in the present crypto environment, trying to take your hard-earned money.
In many of these frauds, victims give hackers their seed word, giving attackers access to their wallet’s funds and private keys.
Let this be the first of many cautionary statements. Never reveal your seed phrase to anyone. If they do, instantly “x” off the website or choose not to reply to the message. Never open links or download files from direct messages (DMs) on websites like Twitter, Discord, or Telegram.
One of the quickest ways to lose all of your money is to reveal your seed phrase.
How to Keep Your Cryptocurrency Wealth in a Hot Wallet
Hot wallets and cold wallets are the two different kinds of cryptocurrency wallets. Each wallet has a private key, which is a cryptographic password that grants users access to their money.
Digital, always online, and linked to the blockchain, hot wallets are. Hot wallets are “always online,” making them vulnerable to hacking.
Using a hot wallet to store any sum of money that you are not comfortable losing is dangerous, as a general rule.
Hardware wallets keep your cryptocurrency offline and can only connect to the blockchain with your private key.
Additional advice for keeping your wallet safe:
- On all wallets and exchanges that support it, always use two-factor authentication (2FA).
- Never divulge your secret key.
- If you don’t intend to actively trade it, don’t keep your cryptocurrency on an exchange. Your simple password is the only thing preventing a hacker from gaining access to your money.
Using Money for Exorbitant Gas Prices
People pay “Gas” to compensate bitcoin miners for their computational power when processing blockchain transactions.
You can determine gas prices by network congestion, therefore the busier the network is at the time of the transaction, the more expensive the cost will be.
Gas often costs more than the transaction, turning a simple, affordable transaction into a headache.
Time-sensitive transactions include well-timed trades and NFT mints. However, some tasks can be significantly less urgent than others, such as transferring tokens between personal wallets. Always try to locate a moment when the gas is low for those who can wait. Otherwise, you are simply wasting money online.
Etherchain’s GasNow feature can help you avoid paying exorbitant gas prices.
The tax and estate planning problems relating to NFTs and cryptocurrencies are intricate and are continually changing.
Author Bio: Suzanne Dieze is a technical content writer and preferably writing technology-based blogs and articles. I have a few published pieces under Mobile Based Applications, NFT Minting Website Development and Data science consists of proven techniques, future costs, and benefits.