News & insights
What happens to my cryptocurrency when I die?
25th April 2022
The popularity of cryptocurrency has skyrocketed in recent years with millionaires being made overnight.
Due to the increasing use of blockchain technology (the technology that allows cryptocurrencies to exist) the landscape is constantly evolving – in 2022, there are now over 16,000 different cryptocurrencies! So, the question we are increasingly asked in recent years is ‘what will happen to my cryptocurrency when I die, or if I no longer have the mental capacity to make decisions for myself?’.
What are cryptocurrencies?
Cryptocurrencies are a type of digital currency that’s controlled independently from a central bank. The currency is supported by technology called blockchain, a public ledger that can’t be changed.
Cryptocurrencies are held in a digital wallet and can be exchanged for goods and or services in the digital sphere. They can be transferred directly from person to person without using a bank or third party. In order to access this digital wallet, users must have their cryptographic keys, known as a private key and a public key.
How do I pass my cryptocurrency on when I die?
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, your estate 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. Today in 2022 the price of a Bitcoin, the first cryptocurrency, could be anywhere between £25,000-£40,000 (the value is changing by the second). For less known coins, it is worth seeking specialist advice if unsure about the value. Given the possible value, it is important to understand the tax implications of passing on your cryptocurrency and investigating possible ways to minimise the impact of such taxes.
What happens to my cryptocurrency if I lose mental capacity?
If mental capacity is lost, an attorney acting under a registered Lasting Power of Attorney for property and financial affairs would be able to make decisions in relation to the cryptoassets.
What are the difficulties?
Access:- Millions of pounds worth of cryptocurrency has been lost because owners have died without making the appropriate provisions to allow access to the currency. The details of how to access your cryptocurrency holding must be made available after your death or the asset will be lost. This should include all your usernames for online accounts and the public and private keys for each.
It is also worth noting that wanting to access someone else’s account without specific authority, for e.g. for someone who has lost mental capacity, may breach certain laws, depending on the jurisdiction which governs the account in question. So if you do not have your wishes properly documented, prepared and/or witnessed, there could be significant implications for your attorney or personal representative.
If you trade in cryptocurrency, it is important that you make provision for when you die or in case you lose mental capacity. It can be a complicated matter involving various laws and jurisdictions, and with serious tax implications, including Inheritance Tax and Capital Gains Tax. Speaking to a solicitor is essential if you have significant cryptoassets.
There are other digital assets that have no monetary value, but would need to be managed when you die. These include digital subscriptions (e.g. Netflix, Spotify, Amazon Prime); social media accounts (Instagram, Facebook, Twitter); and many more. There is no uniform policy for dealing with online platforms when someone dies, but it something that requires some consideration in advance. As well as helping you plan, your solicitor can keep a secure record of your account details, including usernames and passwords, securely on file.
Daniel Williams (TEP)