Cryptocurrencies are digital currencies, such as Bitcoin, Litecoin, Ripple and Ethereum, which are controlled by a company independent of central banks. These assets use digital ‘keys’ to be accessed, and said keys are stored in a ‘wallet’. Their ownership records are stored on a digital ledger supported by distributed ledger technology, commonly blockchain. Blockchain has strong cryptography, so it is extremely difficult to hack, change or cheat. This means that it can be secure enough to store valuable cryptoassets.
Although the legal stance on the inheritance of cryptocurrencies is still being decided, they are treated in much the same way as property assets; able to be owned, gifted and inherited.
Despite this, including your cryptocurrencies in your Will is simply not enough. Below are the key steps involved in ensuring the accessibility of your assets in your Will:
- Include information about your digital wallets, although you should never provide specific details in the actual Will document. As soon as the Grant of Probate is obtained, the Will is a public record, so the information is open to fraud.
- Make a Letter of Wishes which contains your passwords and PINs.
- Include a guide in your Will that will take the Executors through the process of accessing your cryptoassets to be distributed, transferred or sold to your beneficiaries.
Because blockchains are decentralised for the sake of additional security, there is no way of restoring the keys to access the currency. Therefore, the steps above are crucial – if they aren’t followed, and a person passes away without leaving information about accessing their virtual wallets, the cryptocurrency will be lost, and is unrecoverable.
Even when it is mentioned in a Will and valid Death Certificate, because – as a decentralised system – there is no centralised organisation to be able to help Executors or beneficiaries, you won’t be able to recover any cryptoassets without the specific information listed above.
There are many ways to store information about your digital wallet, however, including:
- A hot wallet – meaning the key is stored online; the risk being that it is therefore more susceptible to fraud
- A cold wallet – where the key is stored on an offline computer, USB, or written on paper, all of which can be stored in a safe for added security
- A hosted wallet – where the key is held by a third-party service
- Banks – certain banks allow clients to buy and sell cryptocurrency from new accounts, and are also willing to store digital wallets and keys
Because there is no centralised organisation involved in cryptocurrency, even though your Executor may have proof of who you are and are able to supply copies of your Death Certificate and Will, this is irrelevant when there is no organisation to bring this information to. With the approximated total market value of cryptocurrencies exceeding £1.1 trillion, the failure to account for the succession of your cryptoassets could cost your Estate greatly.
If you would like to include cryptocurrencies in your Will, we offer free initial consultations where we discuss how we can help. To contact us, either call at 01628 334250, or email us at info@circelaw.co.uk.
