May 12, 2021

What happens to Cryptoassets when you die?

This post was written by: Jade Gani

Cryptocurrencies are digital currencies including Bitcoin, Litecoin, Ripple, and Ethereum and are controlled independently from a central bank. The currencies use a virtual wallet that contains digital ‘keys’ that are needed to access the currency. The actual currency lives in a digital ledger which is supported by a technology called blockchain. Blockchain is essentially a digital ledger which is extremely difficult to hack, change or cheat. This ensures it’s secure enough to store valuable Cryptoassets.

Whilst there isn’t a concrete legal stance on planning the inheritance of cryptocurrencies, we do know that cryptocurrency is treated in a similar way to other property assets which can be owned, gifted and inherited.

However, it’s not enough to simply include cryptocurrency in your Will. These are the key things to do to ensure the cryptocurrency can be accessed when the Will is being administered:

  1. Include information about your digital wallets in your Will. Never put any specific details about the cryptocurrency in the Will document itself. Once a Grant of Probate has been obtained the will becomes a matter of public record, leaving the information open to fraudsters.
  2. Create a Letter of Wishes with your Will which includes passwords and PINs.
  3. Include a step-by-step guide to explain how your Executors can access your cryptocurrency to distribute, sell or transferred to your beneficiaries.

These steps are extremely important: if a person dies without leaving information about the private keys to the digital cryptocurrency wallet, the cryptocurrency will be lost.

Blockchain is a decentralised and extremely secure process, and there is no way of restoring a private key. Even with a mention in a Will and a valid Death Certificate, accessing the cryptocurrency without the wallet information will be difficult because there’s no central organisation managing these digital wallets to help the Executors and would-be beneficiaries.

There are a number of different ways to store digital wallet information including:

  • A hot wallet – the private key is kept online. The risk here is that it may be targeted by fraudsters;
  • A cold wallet – where the key is written on paper, kept on a USB stick, or an offline computer. All of these can be stored in a safe for security;
  • A hosted wallet – where the private key is held by a third-party service; or
  • Banks – some banks allow cryptocurrencies to be bought and sold from a new bank account. They also store wallets and private keys of behalf of clients.

There is no central organisation in charge of these digital wallets, so although the person’s Executors might be able to prove who they and can provide copies of the Death Certificate and Will, it doesn’t help when there is no organisation or regulator to take this information to. The current total market value of cryptocurrencies is estimated at £1.75 trillion worldwide, so failure to plan for the succession of these types of assets appropriately could cost your Estate significantly.