Including cryptocurrency in your Will is slightly different to including other assets as 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.

Including cryptocurrency in your Will requires more planning and thought than is required for more traditional assets.

What is cryptocurrency?

Although cryptocurrency 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. Cryptocurrencies are stored virtually on a “blockchain”. To access this you need a private, unique key. It’s crucial that your executor knows where to find this private key. With this information, they can 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:

1. 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.
2. 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 and 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.
3. 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 that they are aware of the tax implications. When you dispose of cryptocurrency, you may incur a capital gains tax liability. Therefore, it’s important that an executor obtains tax advice from a specialised cryptocurrency accredited accountant.

Here to Help

Contact us now for free no-obligation initial telephone advice about leaving cryptocurrency as a gift in your Will.