In this article, the author discusses the safe way to inherit crypto assets and why decentralised trusts are more cost effective than traditional ones.

This article is written by Ruslan Tugushev (pictured), CEO of Dubai-based UBD Network, a professional multisig platform designed to enhance security and collaboration in the cryptocurrency space. The author has a strong background in investment capital, having previously established a crowdfunding platform that helped blockchain startups secure funding. 

Those who wish to respond with comments can email: tom.burroughes@wealthbriefing.com. Comments of guest contributors are not necessarily endorsed by the editorial team.

Digital asset inheritance is a tedious process characterised by opacity, lots of paperwork, and serious headaches for beneficiaries. Unless the deceased investor had specifically included his crypto estate in his will with clear proof of ownership before passing away, heirs can prepare to wait months, if not years, before they can claim their rightful heritage.

While brokerages allow account holders to list beneficiaries, the traditional inheritance system is also flawed, especially when it comes to crypto. From squandering heirs and family disputes to high fees and restricted control, inheritance trusts fail to provide an efficient way for deceased investors to pass on their wealth to inheritors.

The good news is that decentralised trusts are here, and I believe they can provide an efficient, secure, and hassle-free way for crypto inheritance at a fraction of the costs of traditional solutions.

The flawed system of traditional inheritance
When it comes to crypto, the traditional inheritance system is ill-equipped to handle digital wealth's nuances. This means that heirs may face needless complexities and avoidable losses when attempting to claim their heritage.

According to Owner.One's survey of 13,500 high net worth families with capital of up to $100 million, 48 per cent of capital founders are concerned that their families won't be able to inherit their capital and assets. Despite this fact, only 6 per cent of respondents have set up or are working on a personal capital inheritance strategy and a wealth transfer plan.

What's worse, the study has revealed that transitioning from fiat to crypto and back resulted in a disruption of ownership continuity in 91 per cent of the cases. The lack of industry knowledge among capital founders is also concerning. Eighty-seven per cent of respondents are not aware that it's impossible to recover digital assets once the basic data related to them has gone. Indeed, an estimated 20 per cent of the bitcoin supply and over $3 billion ETH are considered missing, with lost private keys representing a significant part of the cases.

I'm also concerned about traditional inheritance trusts' lack of proper controls over how heirs can spend their heritage. In fact, 70 per cent of wealthy families lose their wealth by the second generation and 90 per cent by the third generation. Another study found that heirs save roughly half their inheritance and spend or lose the other half in investments on average.

With unrestricted access to wealth, many heirs go on a spending spree, and this reckless expenditure depletes the estate quickly. Simultaneously, a rising number of inheritance cases are taken to court, and I believe the ambiguity of wills and the flaws of the traditional inheritance system are to blame.

You shouldn't trust exchanges with your crypto either
In addition to traditional solutions, the inheritance process is also highly inefficient on centralised crypto exchanges (CEXs).

According to a Blockworks report, providers such as Kraken, Coinbase, and Binance have different protocols for passing on cryptocurrency wealth to heirs. But what's common to them are the unnecessary complexities, tedium, and obscurity beneficiaries must go through before they can gain access to the deceased person's assets.

As a matter of fact, the mourning father of an 18-year-old crypto investor, who unexpectedly passed away due to acute leukaemia, was unable to withdraw his son's digital asset holdings from Coinbase even a year after his death. In contrast, the father had no problems retrieving his son's bank account balance, 401(k), and last pay cheque.

Why decentralised trusts are the solution for crypto inheritance and wealth management
As I see it, decentralised trusts can provide an efficient, resilient, and convenient solution for passing on inheritance to heirs.

With decentralised trusts, grantors can set and enforce their own terms for inheritance. For example, they can tie payouts to conditions such as getting a new job, graduating from university, or reaching a specific age. This way, they can incentivise heirs to meet positive life goals while preventing them from being reckless with their heritage. Decentralised trusts can also be leveraged to avoid family feuds and guarantee the fair distribution of crypto wealth with unambiguous and accurate allocations.

Decentralised trusts are self-custodial solutions, meaning that neither grantors nor beneficiaries must face the counterparty risks of centralised exchanges. Some of these services even leverage multisig wallets to safeguard users' funds more efficiently.

What's more, they offer such services at a fraction of the costs of traditional trusts. Regarding the latter solutions, users must pay at least $50,000 to create a new trust, $25,000 to edit existing conditions, and $500 a month to maintain them.

Considering the above, I believe decentralised trusts will gradually become significant players in the inheritance market as more people start to realise how efficient and attractive they are for passing on crypto wealth to heirs compared with legacy solutions.