Learn: What happens to your NFTs when you die?
Once a nonfungible token (NFT) trader dies, their digital collectibles may be forever lost in the blockchain if they do not have a handover plan. Because of this, lawyers believe that it’s best to craft a way to pass on their assets in case of death.
From a legal standpoint, creating an estate plan, which is simply arranging the management and disposal of properties in preparation for future incapacity or death, seems like a good approach.
Jaime Herren, a wealth services lawyer, told Cointelegraph that this might be the best step that NFT owners can take to make sure their NFTs are passed on to their loved ones after death. Herren explained that:
“If you have a valuable asset, it is always worth taking steps to ensure it ends up where you want after your death, whether that is to your heirs or to a charity. Substantial crypto assets require planners and fiduciaries with technical knowledge.”
The attorney also explained that if the right plans are already in place, beneficiaries will not need to take any more affirmative actions. All they need to have is a wallet that will receive and hold the tokens. Herren explained that if the NFT owner dies while a comprehensive plan is in place, the executor or trustee will be the one to ensure that their NFTs will be transferred to the beneficiaries. However, this also requires NFT collectors to give these executors and trustees instructions to access your wallets.
“Obviously, from the estate planning perspective, the worst thing you can do is hold your blockchain assets in a cold wallet with only a brain key. That is the dreaded situation validating tales of lost permanently lost crypto-fortunes,” Herren added.
According to recent data by blockchain analytics firm Glassnode, about 2.7 million Bitcoin worth around $76 billion, have not been touched in a decade. Crypto influencer Anthony Pompliano believes that it’s possible that these assets are either being held by disciplined investors or are already forgotten and lost.
Cointelegraph also asked those working in the NFT space if there’s a possibility of automating the transfer of NFTs to specific wallets after death. When asked about this topic, Oscar Franklin Tan, the chief legal officer of NFT platform Enjin, shared that this remains more of a legal than a tech issue. Tan explained that:
“Smart contracts are certainly flexible enough to transfer NFTs on the death of the owner. However, death in the physical world is not an on-chain event, and the death would have to be linked to the smart contract through an oracle for it to trigger.”
Tan also added that until government death certificates become accessible via blockchain oracles, the death still needs to be linked by a trusted third party, like a lawyer, to verify the death. “An on-chain transfer on death will, in concept, still trigger legal consequences of death, such as inheritance taxes,” he added.
Ajay Prashanth, the head of ecosystem growth at NFT insights platform bitsCrunch, echoed Tan’s comments. Prashanth, who is also a software engineer, said that setting up smart contracts to automatically transfer NFTs after death is “technically feasible.“
However, practical challenges and legal considerations need to be addressed in implementing such a system. He explained that after enlisting the help of legal personnel to verify the proof that the collector passed away, it’s necessary to set up the smart contract to connect with the legal documents.
“The process entails defining beneficiaries in the smart contract code or connecting the smart contract to a different legal document, such as a will, that specifies the desired beneficiaries,” he explained. This will allow the smart contract to find the correct recipients and receive specific instructions on what to do after verifying the death, such as transferring the NFTs.