If a nonfungible token (NFT) trader dies without a plan in place, their digital collectibles may be destroyed forever in the blockchain. As a result, lawyers consider that it is best to devise a method for passing on their assets in the event of death.
Creating an estate plan, which is essentially preparing the management and disposition of properties in preparation for future incapacity or death, appears to be a good legal method. According to Jaime Herren, a wealth services lawyer, this may be the finest action that NFT owners may take to ensure that their NFTs are handed on to their loved ones after death. Herren elaborated:
“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 further stated that if the appropriate plans are already in place, beneficiaries will not need to take any additional positive measures. All they need is a wallet to accept and store the tokens. If the NFT owner dies while a comprehensive plan is in existence, the executor or trustee will be responsible for ensuring that their NFTs are distributed to the beneficiaries. However, NFT collectors must also allow these executors and trustees permission to access your wallets.
“Obviously, holding your blockchain assets in a cold wallet with only a brain key is the worst thing you can do in terms of estate planning.” That is the dreaded situation that validates tales of lost crypto-fortunes,” Herren noted.
According to Glassnode, a blockchain analytics business, around 2.7 million Bitcoin, valued at approximately $76 billion, have not been touched in a decade. Crypto influencer Anthony Pompliano argues that these assets may be retained by disciplined investors or have already been forgotten and lost.
Coinmicroscope also asked folks in the NFT field if it is possible to automate the transfer of NFTs to certain wallets after death. When asked about this, Oscar Franklin Tan, the chief legal officer of NFT platform Enjin, stated that it is more of a legal issue than a technological one. Tan went on to say:
“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.
Tan’s remarks were mirrored by Ajay Prashanth, the head of ecosystem expansion at NFT insights platform bitsCrunch. Prashanth, a software engineer, believes that using smart contracts to automatically transfer NFTs after death is “technically feasible.”
However, practical obstacles and legal considerations must be overcome before such a system can be implemented. He explained that after enlisting the assistance of legal people to verify the proof that the collector died, the smart contract must be set up to connect with the legal paperwork.
“The process entails either 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 stated.
This enables the smart contract to locate the appropriate receivers and receive explicit instructions on what to do after verifying the death, such as transferring the NFTs.