Most seek out estate planning advice after major life events like marriage, childbirth and loss of a loved one...or increasing Bitcoin prices. According to Pamela Morgan, CEO of ThirdKey Solutions LLC, the number of clients seeking estate planning services has soared, following Bitcoin’s ever-rising price.

But digital currencies don’t have to comprise most of your net worth in order to benefit from estate planning. Since an originally small holding can be worth much more when the prices rise, “Every digital currency holder should care about this,” said Morgan in an interview.

Don’t use dead man’s switch

A dead man’s switch, in which cryptocurrencies are automatically transferred to the heir’s account upon death, has long been a popular solution for estate issues involving digital currency. However, Morgan says that in real life, this strategy doesn’t work as well as one might imagine.

According to Morgan:

“(Automated transfer) requires all the heirs to be able to manage their private key. You can’t generate their private keys and give that to them. It’s not good security practice.  But more importantly, they will need to hold those keys, for an indefinite period of time.”

Morgan points out that cryptocurrency neophytes often lose keys. Not only that, but every time a person bought, sold, or moved their assets, they would have to continually update their heir’s keys.

Morgan says:

“And you’re talking about ‘Oh hi grandma, here are three new keys’, it just doesn’t work in the real world.”

If everyone involved in the transfer is well-versed in cryptocurrency, the above wouldn’t be a problem, Morgan said, but most people who will be inheriting assets are not capable of managing them.

Practicality aside, since activating a dead man’s switch requires the owner not to access the network for a certain period, it creates incentives for people to prevent the owner from accessing the network, Morgan wrote in her blog.

Untried technology

Human factors notwithstanding, the smart contract technology that enables automatic transfer of funds today needs to be tested more thoroughly to be trusted the funds of estate planners, said Morgan.

“A lot of people are looking at the Ethereum platform, probably it’s because it’s the oldest platform, at the ripe old age of three. It’s a child. We haven’t tested the tech at scale hard enough and long enough for me to trust my clients’ money, or for me to say ‘you know what, I’m going to put my money into this smart contract.”

The Ethereum Blockchain was split into two following the hacking of “The DAO,” a decentralized company built upon the original Ethereum Blockchain.

Morgan said a reliable technology should not only be one of many Blockchains, but a widely accepted protocol.

“The reality is that, it usually takes at least a couple of years, before we see the protocol upgrade, before it’s available at consumer level. As an industry, we have been very impatient.”

Bitcoin, the oldest Blockchain-based cryptocurrency, was created in 2009. It has only begun to be hailed as “going mainstream” by mass media in 2017.

Keep your keys

What about the old fashioned way, in which clients put their assets in the trust of a lawyer? Morgan’s advice is clear and simple: Whatever you do, don’t give away your private keys.

Cryptocurrencies depart from traditional assets in the fact that lost funds cannot be retrieved. When a third party has access to the private keys, that individual can spend the currency. Since cryptocurrency transactions are non-reversible, funds, unlike funds in a bank, are impossible to recover.

Giving private keys to a lawyer means that the private keys could end up in a legal document in a law firm’s database that’s easily accessed by other lawyers or could get hacked, Morgan warned.

And writing private keys into the will can result in loss of funds when the will becomes public record, as happens in many jurisdictions, Morgan said.

Morgan added:

“A lot of people put off (cryptocurrency estate planning) because they think they would have to hire a lawyer. They think they have to trust a third party. And that’s false.”

Proper planning

The key to cryptocurrency inheritance is to ensure two things, Morgan said, make sure that your heir knows what you have by giving them an updated inventory of your digital assets, and make sure that your heir knows how to access it.

The process, detailed in Morgan’s blog, involves conducting a security self-check, and teaching your loved one ways to access your digital property.

Morgan has also written a  Letter to Loved Ones to assist the process.