Cryptocurrency is an emerging investment market, with Bitcoin probably being the most well-known. It is therefore important that you understand how this should be documented in relation to your Will to ensure that it may be dealt with in accordance with your wishes.
What is cryptocurrency?
Cryptocurrency is a digital payment system that allows you to hold the currency in a digital wallet. It is an intangible asset unlike cash, so there is no physical hard-copy asset. The digital wallet is a web-based or hardware-based system.
The digital wallet may be accessed by the use of a key that is specific to you. There is a public key and a private key.
The public key allows people to send currency to you, and so is public for anyone to be able to know.
The private key is your login and password for the wallet and so is only known by you. This allows you to access the wallet and move funds. This must therefore be kept private and confidential.
Does my cryptocurrency form part of my estate?
Cryptocurrency is an asset and therefore would form part of your estate on your death. You may therefore leave this to a beneficiary within your Will.
The issue arises when your Personal Representative wants to gain access to the cryptocurrency to be able to transfer it to the relevant beneficiary. This is very different from other assets such as property, where you can gain access by a physical key.
As your private key must be kept confidential to you, it can be difficult for your Personal Representative to be able to access your digital wallet.
How can my Personal Representative access my digital wallet?
Even if you specifically state in your Will who you want to inherit your digital wallet, they may not necessarily be able to access the cryptocurrency without the private key.
You should therefore have a contingency plan in place in the event of your death.
How should I leave the details?
It is not advisable to include any confidential financial information within your Will. When a Grant is obtained in your estate, your Will becomes a public document. This means that anyone can access a copy of your Will for a small fee. Therefore leaving the details in your Will could open yourself up to fraudulent activity in your wallet.
You should also not consider leaving a letter of wishes as again, this would not be very secure if the details fell into the wrong hands. It would also be difficult to be kept up to date, with changing of passwords and keys. The keys make use of Two Factor Authentication, and so the secondary device would also be required, such as a phone.
How can I make sure that my cryptocurrency is dealt with how I intend?
There are a number of ways that your cryptocurrency may be dealt with when required, and so as not to compromise the security of your wallet. Sharon Henley of Coincover in The Gazette explains the options available:
“ 1. Purchase and store cryptocurrency at a cryptocurrency bank and have the bank manage the keys on your behalf. This will mean that you just need to leave details of the crypto bank and your account with your loved ones. However, this does mean that you won’t actually own your cryptocurrency or have control of it as it will be stored with a custodian.
2. Store your cryptocurrency online in a non-custodial multi-sig wallet and sign up for a cryptocurrency inheritance solution. Here you keep full control of your assets in your own wallet, with your own keys but in the event of a loss of access, or death, the services provide for two independent parties to come together to retrieve the funds on your behalf. In this instance you’d be provided with a beneficiary card to give your loved ones, identifying who to turn to should the unexpected happen.
3. Hold your cryptocurrency on a hardware wallet in which you have stored a copy of the private keys for the wallet, or the 12-word seed recovery phrase for the wallet along with step-by-step instructions on how the wallet can be accessed in a safe-deposit box or vault.”
How can we help?
Emma Lewin is an Associate in our expert Wills and Probate team.
For more information on the subjects outlined in this article, please do not hesitate to contact Emma or another member of the team in Derby, Leicester, or Nottingham on 0800 024 1976 or via our online enquiry form.
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