You don’t have to look far these days to find someone who has invested in cryptocurrency or bitcoin.
Crypto-assets are fast growing in popularity but it doesn’t mean everyone understands them, which makes it challenging for estate planning.
The process required to pass on crypto-assets to loved ones can seem overwhelming.
For this reason, accounting for cryptocurrency in estate plans is often put in the too hard basket or insufficiently managed.
The reality though is that if you don’t include cryptocurrencies in your estate plan, your loved ones may miss out on the assets all together.
Challenges of Crypto-assets
There are several factors that can make estate planning for cryptocurrency difficult. These include:
- Cryptocurrencies are not the same as traditional financial assets and can not be accessed via the same means.
- Cryptocurrency by its nature is based on anonymity of transactions, so without specific knowledge about a person’s crypto-assets, it can border on impossible to identify and secure the assets.
- Recording cryptoassets can be difficult because the assets often change on a day-to-day basis. Traders may be dealing with any of 1,500 or so currencies on the market.
- The process can be complex and it may seem like an unfair burden to place on loved ones.
Cryptocurrencies are stored and managed using a digital wallet, which comes with keys used to authorise transactions.
The keys are a critical security measure and are the only way to access the crypto funds.
For this reason, it’s not advisable to store details of a key in a public or easily accessible document.
Care needs to be taken on how keys are managed in estate plans.
Somehow you will need to provide a record of what you own, the keys and how to access them, without compromising the security of your assets.
You will need to approach this in a similar way you would use to manage your other digital assets.
One of the best options is to provide a document outlining how to access your crypto-assets and providing it to your Wills solicitor. They will keep it in safe custody with your Will and any instructions you wish to leave.
Alternatively you may choose to store key details on a secure digital archive site or in a safety deposit box.
In any case, you will want to speak to a qualified legal professional to ensure your estate plan accounts for the existence of your crypto-assets and how to source the information needed to access them.
Access Information To Provide
Key information will need to be provided to ensure your Executor or beneficiaries can access the cryptocurrencies.
The level of information will depend on how much knowledge the person has about crypto-assets, but generally speaking you will need to include:
- The kind of assets, key locations and access controls such as PINS, passphrases, multisignature or timelock requirements.
- You will want to avoid stating values in terms of local currency and exact number of assets as these are likely to change, except in the case of long-term storage.
- List any exchanges you use to trade cryptocurrencies and assets, the details of the digital wallet you use, and any other apps or software needed to manage the transactions.
- Highlight any specific security concerns such as being careful to manage ‘wallet backups’.
- Outline step-by-step with sufficient detail on how to access the assets.
- Provide details of a trusted cryptocurrency solutions provider and any other key contacts that can give technical assistance if required.
You should speak to a qualified legal professional to develop or update your estate plan to ensure it accounts for any crypto-assets you have.
Contact Gill & Lane for help with this and all other aspects of your estate and digital asset planning.