What will happen with my Cryptocurrency when I die?
There are more than 800 cryptocurrencies that you can use to make purchases online, send money to friends and family, or get paid for your work. But what happens to your wallet when you pass away?
As cryptocurrency grows in popularity, you need to make sure you bring these into your estate planning, make a trusted person aware of the fact that you own such currency, and how to find they can find it. After your death the fate of your cryptocurrencies will depend on several factors, such as whether you have made provisions for their transfer or disposal in your will or other legal documents. In South Africa, cryptocurrencies are not yet explicitly regulated, and there is no specific legislation governing the inheritance of cryptocurrencies. However, cryptocurrencies can be considered assets or property, and their distribution can be governed by South Africa’s laws of succession.
The executor of your estate will also be responsible for managing and distributing cryptocurrencies according to your will. If you have not made any specific provisions, your cryptocurrencies may be treated as part of your estate and distributed according to the laws of succession. It is best to make provisions for the transfer or disposal of your cryptocurrencies in your will or other legal documents to ensure that they are handled in accordance with your wishes. You need to ensure that your bitcoin is identifiable and accessible for your executor and beneficiaries. The ‘keys’ are crucial for transferring ownership or spending your bitcoin. It is therefore important that the keys need to be protected and practically dealt with by your executor. If a key is lost or no longer accessible, then, in essence, you will have lost your bitcoin. You may want to consider storing your private keys and other relevant information in a secure location and informing your beneficiaries of their existence to facilitate the transfer of your cryptocurrencies.
If you have inherited cryptocurrency from someone, there are a few steps you should take to ensure that you have control over the assets and that they are secure:
- Familiarise yourself with cryptocurrency: If you’re not familiar with cryptocurrency, it’s essential to educate yourself on the technology and how it works. You can start by researching the specific type of cryptocurrency you inherited, how it’s stored, and how it’s traded. Cryptocurrency is a digital currency that creates a new way to pay and receive money, using encryption techniques to regulate and verify the transfer of funds. Encryption aims to provide security and safety, by implementing cryptographic methods that involve the solving of complex mathematical problems and stored in digital wallets. You save virtual coins in your digital wallet, on your phone or computer. This also makes it easy to transfer money anywhere in the world because there are “no borders between countries” where cryptocurrencies are concerned. The first decentralised cryptocurrency was Bitcoin, and was soon followed by many other cryptocurrencies, such as Litecoin, Ethereum, Monero, and Zcash.
- Secure your cryptocurrency: Once you understand how the cryptocurrency works, you should ensure that it’s secure. You can do this by setting up a secure wallet, which is a digital storage system for your cryptocurrency. Make sure to keep your private keys safe, and never share them with anyone.
- Determine the value of your cryptocurrency: To understand the value of your cryptocurrency, you can check online exchanges or consult with a financial advisor. You should also be aware of any tax implications associated with your inherited cryptocurrency.
- Decide what to do with your cryptocurrency: You can hold onto the cryptocurrency as an investment, trade it for another cryptocurrency or traditional currency, or use it to make purchases.
- If your financial advisor was not aware of this when assisting you with your estate planning and the drafting of your will, it could increase the cost of executors’ fees and estate duty. This could also impact negatively on any liquidity calculations performed during the estate planning process. Because of the anonymous nature of cryptocurrencies, it could be difficult for your executor to trace your holdings and properly account for them unless you have ensured that your executor and/or family members are aware of your holdings and how to access them. Backing up your wallet on an external hard drive and transcribing all access details for the wallet is a practical option to ensure that your executor and loved ones have access of your cryptocurrency.
Get in touch with AED Attorneys to explain the legalities with you, and to make sure that you update your will to include your cryptocurrency. Cryptocurrency will be assets in your estate and can be dealt with to an extent in your will.
AED Attorneys understands that every situation is unique, and although they strive to ensure that the information contained herein is accurate at the time of publishing, it cannot be guaranteed to be without errors or omissions. As a result, AED Attorneys, its employees, independent contractors, associates or third parties will under no circumstances accept liability or be held liable for any innocent or negligent actions or omissions in this article, which may result in any harm or liability flowing from the use of or the inability to use the information provided.