Crypto lawyers recommend, among other things, including highly detailed instructions in one’s will and appointing a crypto-savvy next-of-kin.
The average crypto investor is unlikely to die of old age anytime soon, but that doesn’t mean they shouldn’t have a plan in place to pass on their crypto in the event of an unexpected death, lawyers warn.
According to Dubai-based crypto lawyer Irina Heaver, “billions” of dollars in Bitcoin have been lost due to hodlers’ lack of proper death-related planning.
She stated that many families have been unable to access their loved ones’ crypto assets because private keys were taken to the grave, emphasizing the importance of discussing crypto assets with family and including them in their will.
According to Heaver, the typical crypto investor is a “male millennial” between the ages of 27 and 42, the age range in which arranging one’s financial affairs in case of death is the “last thing” to come up in conversation.
However, the lawyer believes that it is “critical” to confirm that the administrator of one’s will is proficient in using cold and hot wallets in order to distribute one’s holdings properly.
Liam Hennessy, partner at Australian law firm Gadens, believes that crypto investors should be aware that the “basic first step” in protecting their families’ future is to prepare a will, but they should also be aware that crypto is a complicated asset, and that the will must include very specific instructions on where the crypto is and how the keys are accessed.
Heaver has seen “huge problems” with the process of inheriting cryptocurrency, including one case in which a family approached her for assistance in accessing a deceased loved one’s crypto assets.
Because of the lack of understanding surrounding digital assets, digital asset lawyer Krish Gosai, managing partner of Gosai law, believes it is especially important to inform beneficiaries about crypto.
Gosai believes it is important to notify the executor of the will or loved ones of the existence of crypto assets, but he advises against sharing sensitive login information or seed phrases, stating that it is not necessary.
He suggested that the seed phrase be divided among four family members if necessary.
Inheriting cryptocurrency can also be complicated due to differences in tax structures between jurisdictions.
Heaver also mentioned that inheritance taxes exist in some jurisdictions. In the United Kingdom, for example, crypto assets will be “liable” for inheritance tax upon the holder’s death and capital gains tax upon a valid disposal.
There is no inheritance tax in Australia, but Heaver pointed out that there is a capital gains tax if an asset inherited from a deceased estate is sold.
She mentioned that there are jurisdictions with no taxes, such as the United Arab Emirates.
Liam Hennessy, partner at Gadens, added that realizing digital assets at the best price can be difficult due to factors like price fluctuations and smart execution protocols.