As of 2021, there are more than 300 million digital currency users worldwide with more than 18,000 businesses already accepting payments according to cryptocurrency exchange Triple A. Cryptocurrency is a rapidly emerging investment market but, as a new form of currency, it’s important for individuals to understand the finer details of this asset and how it should be documented in your will, as Emma Lewin, solicitor specialising in wills and probate at Nelsons, explains.
The key difference with cryptocurrency in comparison to cash is that it’s an intangible asset, meaning there is no physical hard-copy.
Cryptocurrency is a digital payment method, where currency is held in a digital wallet on a web-based or hardware-based system, which can be accessed by the use of a key that is specific to the user. There are two different types of key:
- Public: This allows the user to receive transactions and is visible to everyone;
- Private: This is the wallet’s login and password that is known only by the user. It allows the user access to be able to move funds and, therefore, must be kept private and confidential.
Part of the estate
Cryptocurrency is an asset and, therefore, forms part of an individual’s estate upon their death meaning it can be left to a beneficiary within a will.
However, this isn’t quite as straight forward as it may seem, as sometimes issues may arise when a personal representative, the individual legally entitled to administer the estate, wants to gain access to the cryptocurrency to be able to transfer it to the relevant beneficiary. This is due to cryptocurrency being very different to other assets, such as property, where you can gain access by a physical key.
As your private key must be kept confidential, it can be difficult for the personal representative to access a digital wallet. Even if it’s stated in the will who is to inherit, they may not be able to access without a private key. Therefore, it’s crucial for a contingency plan to be in place.
Don’t forget the details
When grants are obtained in an estate, wills become a public document, meaning it’s not advisable to include any confidential financial information. At this point, anyone can access a copy of the will for a small fee, which could open people up to fraudulent activity.
Letters of wishes should also be avoided as, again, they would not be secure if the details fell into the wrong hands and are difficult to keep up to date, due to the changing of passwords and keys.
Cryptocurrency is still an emerging market that many are unfamiliar with. Therefore, it’s crucial to seek professional advice before looking to invest in it, as well as legal advice to ensure the will covers all bases for this kind of asset.
For more information on Nelsons’ wills and probate team, please visit www.nelsonslaw.co.uk/wills-and-probate/ or call 0800 024 1976.