With cryptocurrency becoming more widely held, it is important to understand what will happen to this type of asset after someone dies.
in England and Wales, various anti money laundering regulations have been put in place, and since the changes to the regulations in January 2020, it has begun to be recognised for what it truly is; a financial crime.
Cryptocurrency is stored in a virtual cryptocurrency wallet which is accessed using two keys. The public key is similar to an electronic address, while the private key or passcode allows the holder of the cryptocurrency to access it. If the private key is lost, the cryptocurrency cannot be accessed or used. This means that the accounts information and access to any crypto assets will not be possible to retrieve.
How to Pass On Cryptocurrency
Cryptocurrency can be left to your loved ones in your Will in the same way as other assets. If you do not leave a Will, then all of your estate plans will pass under the Rules of Intestacy to your spouse and/or close family members in a specified order. Cryptocurrency can also be placed into a trust in the same way that other assets are, to benefit future generations.
The value of your cryptocurrency holding will be included in your estate for Inheritance Tax purposes.
Accessing Cryptocurrency After a Death
The main difficulty that can arise when passing on cryptocurrency is one of access which often leads to requiring legal services. The private key that the owner has must be kept securely, however, if the cryptocurrency is to be left to others, then your personal representative must be able to access and transfer it.
There are a number of ways to store your crypto, as well as plenty of ways to store the private key to a cryptocurrency holding. Most of them involve a digital crypto wallet that can store the key to your digital currency and digital assets securely.
- Hot Wallet
The private key is stored online in a digital wallet. This means there is some potential for it to be stolen, and it may also be difficult for your personal representatives to access when the time comes.
- Cold Wallet
This is an offline solution, with the private key written down or stored on a USB stick or an offline device. The problem with this is making sure that your personal representatives know of its existence and where it is stored. While you will want them to be aware of it, you also need to keep it secure.
- Hosted Wallet
This is an online third-party service that will hold the private key on your behalf. Different organisations will have different rules regarding access and after you have died it may be impossible for your personal representative to obtain the key.
- Bank Storage
Banks are starting to develop facilities for both trading cryptocurrencies and storing private keys. Certain central banks are the ones most likely to have these facilities available.
How to Leave Cryptocurrency so that it is Accessible
You should make sure that you mention your cryptocurrency to your solicitor, such as our cryptocurrency lawyers in the UK, but only when you have your Will drafted, but no specific details, such as the private key, should be included in the document, as your Will will be made public when probate is granted.
The details of how to access your cryptocurrency holding must be left to your personal representatives however or the asset will be lost. This should include all of your usernames for online accounts and the public and private keys for each. The process is not currently ideal, but you will need to leave the information somewhere it can be found and used when the time comes while trying to ensure that it is secure in the meantime.
If you would like to speak to one of our expert lawyers at our Solicitors in Wokingham or find out more about us at CP Law, ring us on 0345 2413100 or get in touch with us at firstname.lastname@example.org