Cryptocurrency and digital assets are becoming more prominent today. For individuals and businesses alike, these assets can range from small sums to millions of dollars. Currently, the cryptocurrency industry is worth around $101 billion worldwide. As these currencies continue to grow, they are becoming a popular investment and those who possess them are looking to make sure they can distribute them to family and loved ones when they pass.
Estate planning and your cryptocurrencies
It is becoming regular practice to see digital coins and cryptocurrencies as assets in deceased estates. But is not as easy as just writing the asset into your Will. If these assets are not dealt with correctly, they could be extremely difficult to retrieve, and are sometimes never recoverable.
When access to a digital wallet is gone, the asset is lost forever. If the key holder dies without sharing their private key, their assets on the blockchain cannot be retrieved. Coincover currently estimates around 4 million Bitcoins, totalling around $30 billion and 20% of all available Bitcoin, have been lost through deceased estates and ill planning. With the popularity of cryptocurrencies on the rise, and the complexities of distributing the asset, this number is estimated to increase exponentially.
Issues that may arise with your assets after death
There are a variety of issues that may arise when dealing with your digital assets or when trying to distribute them after you die. There are some important factors to consider when selecting your executor, having your Will drafted and deciding how you will have your crypto assets dealt with upon your death.
Firstly, the executor will need to know how to distribute your crypto asset, which means they must be tech-savvy enough or familiar with the technology to complete the task. If the executor cannot access the digital currency, which can often be difficult to access, the investment may be lost forever. As highlighted, this is a regular occurrence, which is why legal advice is always encouraged when dealing with intangible assets.
Secondly, if the asset information is stored in the Will, the information must be kept secure. This information will have detailed summaries of how to access/ find the assets and carry the details in which is needed to unlock them. This is a delicate process, as Wills can become public documents and therefore be assessable to anyone. Therefore, it is essential that no private information is in the Will itself.
New solutions to these issues unique to the cryptocurrency space are becoming more prominent, such as writing one’s Will onto the blockchain to be automatically executed via smart contracts. The testator can list their assets and private key on their Will, but it would not be accessible to anyone except the beneficiaries. However, it is not clear whether such a Will complies with the provisions of s 10 of the Succession Act 1981 (Qld) that it must be in writing, be signed by the testator and have two witnesses.
Outside of these bleeding-edge solutions, there are a range of other ways that important information regarding crypto assets can be shared through a Will without including the information in a potentially unsecure document:
- Safety deposit boxes: hard wallets can be stored in a safety deposit box and instructions given to the Executor
- M-of-N transactions: multiple signature transaction requiring a minimum number of signatures (M) out of a possible number of signatories (e.g., 3 out of 5 signatories)
- Dead man’s switch: computer program that sends an email and if no response, will check for a death certificate and execute a transaction upon discovering one
- Lock time transactions: where the person identifies the time at which the transfer is to occur
- Sharing scheme: share parts of your private wallet with certain people who collectively unlock the private wallet (not recommended in many situations due to high risk)
Should I update my Will?
To prevent any hiccups or difficulties when your loved ones are trying to distribute these assets, it is encouraged that you update your Will to include relevant provisions to deal with them effectively. Salerno Law has a dedicated Cryptocurrency Team who recently briefed our experienced Wills and Estates Team in relation to testamentary dispositions of crypto assets and the issues and solutions available for these new forms of asset. If you have concerns surrounding cryptocurrency, wills and estates, or any other matter requiring professional, tailored and cost-effective legal advice, contact us today!
By Josiah Neal