What happens to your Crypto assets after death?
As more and more people invest in cryptocurrency, questions over the inheritance of this non-physical asset have arisen. What happens to your investments when you die? How do you ensure that they don’t get lost forever? Here, we look at some of the specifics of passing on cryptocurrency after death.
Crypto as part of your estate
Just as with your property and physical assets, cryptocurrency is considered a probate asset. This means that it has to go through probate before it can legally be transferred to any beneficiaries. However, even the most popular crypto exchanges don’t support any kind of beneficiary designation for digital assets, such as Transfer on Death Deed (TODD), which is a simple way to let owners pass on an asset to a named beneficiary.
The problem with crypto
The issue with crypto investments is that there is no central administrator or bank that manages the assets. They’re stored in a digital wallet app, and there is no certificate, deed or account statement that proves ownership. Instead, an assigned private key (essentially a string of random numbers and letters) is issued that enables the holder to access their currency. In addition, a public key is assigned, which enables crypto exchanges and buyers to identify the assets. Unless both keys are accessible by the executor of your Will, no-one can gain access to the account, and your assets disappear.
What to do
There are several ways in which your details could be passed on to an executor or loved one, so that your cryptocurrency accounts can be accessed after your death. Although you should name a beneficiary for your crypto assets in your Will, it’s not advisable to leave instructions for them there, since the Will becomes a public document after probate is granted.
Instead, think about leaving passwords, digital keys and other sensitive information regarding your online accounts somewhere secure, either in a written note that is kept with your Will, online in a digital wallet, or on a physical device such as a USB stick or SSD card. However, you choose to keep the information, do ensure it’s kept up to date and secure.
You may also want to document where the wallet or physical device is located – perhaps in a note with your Will – so that an executor can find it.
Crypto in custodial accounts
Any crypto stored in a custodial account on a crypto exchange such as Coinbase or eToro should be accessible by the executor of your Will if they contact the exchange directly. Of course, the exchange is not going to simply hand over the assets to anyone who comes knocking, so in order to facilitate the transfer, you’ll need to provide the death certificate of the decedent, probate documents, proof of ID and a letter signed by the executor with instructions on how to deal with the crypto in the account.
For further help with how to pass on crypto assets, speak to a Kent accountant for probate services today. Experts such as Kent tax advisors can assist with finding the most simple and tax efficient way to transfer digital assets to beneficiaries.
