Including cryptocurrency in your Will is slightly different to including other assets. Unlike traditional assets such as bank accounts or shares, cryptocurrency does not leave an obvious paper trail. If it’s not specifically listed, your loved ones may find it difficult to identify and distribute. Consequently, it’s important to ensure that your cryptocurrency (and instructions for how to access and distribute it) is clearly identified in your Will.
Cryptocurrencies – such as Bitcoin – are becoming an increasingly common investment, so it is important to specifically include cryptocurrency in your Will. However, doing so requires more planning and thought than is required for more traditional assets.
What is cryptocurrency?
Cryptocurrency is a virtual currency that can be used as a method of exchange online. However, although it can be used for payment, it is recognised as an asset rather than as a currency. Cryptocurrency left in your Will is treated like any other asset of your estate.
Things you need to know when including cryptocurrency in your Will
If you don’t specifically list your cryptocurrency in your Will., it will be part of the ‘residue’ of your estate. ‘Residue’ is a catchall term for assets that are not specifically listed in your Will.
If cryptocurrency falls into the residue, it can be difficult to identify, especially if you don’t know where to look. But there’s more to including your cryptocurrency in your Will than simply listing it as an asset. Cryptocurrencies are stored virtually on a “blockchain” (e.g. Bitcoin is stored on the Bitcoin blockchain). To access this you need a private, unique key.
It’s crucial that the executor of your Will knows where to find this private key. With this information, they can easily access your cryptocurrency and distribute it, according to the terms in your Will.
Know the details of your cryptocurrency wallet
A cryptocurrency wallet, or ‘crypto’ wallet, is used to store and protect your private key. There are various wallets available, however the most common are:
- Hardware wallets. This type of wallet is external hardware (e.g. a USB stick). Most hardware devices allow you to add extra security in the form of a password or PIN.
- Software wallets. The two most common types of software wallets are desktop and web. Desktop wallets are software that can be installed onto your personal computer. These wallets can only be accessed on the computer they’re installed on. Web wallets are cloud-based programs that can be accessed from any device that connects to the internet.
- Paper wallets. This is a physical piece of paper on which is printed or written a unique private key possibly including the blockchain address. Paper wallets are less likely to be compromised because they can’t be accessed remotely or easily.
We strongly recommend that you don’t write your private keys into your Will, as it becomes a public document – accessible by anyone – when probate is granted. If anyone other than your executor were to access this information, they could steal your cryptocurrency.
The tax implications of leaving cryptocurrency in a Will
Cryptocurrency is treated like any other estate asset and, as such, your Will can be challenged for a share of it. The executor may choose to liquidate the cryptocurrency and convert it into Australian Dollars before commencing negotiations with a challenger. If they do this it’s important they are aware of the tax implications. When you dispose of cryptocurrency, you may incur a capital gains tax. Therefore, it’s important that an executor obtains tax advice from a specialised cryptocurrency accredited accountant.
Including cryptocurrency in your estate planning
Leaving cryptocurrency in your Will requires thorough planning and thought. Taking the right steps now will ensure that your beneficiaries inherit your cryptocurrency assets easily and avoid unnecessary delays.
For more information, or to make an appointment to discuss your estate planning in more detail, please contact us.
