Recent surveys have indicated that as many as 1 in 4 Australian’s have invested, or intend to invest, in cryptocurrencies. With more and more people holding cryptocurrencies, it is important to turn our minds to how these new assets should be handled in the event of your death.
Cryptocurrency coins or tokens are recognised as property by the ATO and when you die will form part of your estate automatically. Therefore, if you don’t specifically mention them in your will, they will go to your beneficiaries along with any real estate, cash, or other belongings. If you want to divide your cryptocurrencies so that certain beneficiaries get specific coins or amounts, you can set this out in your will as specific gifts.
Whether you choose to gift specific cryptocurrencies or not, the most important consideration is how your executor will access your cryptocurrencies after you pass. Given the decentralised nature of cryptocurrencies, there is an extra onus on you as the owner to ensure accessibility in the event of your death, or else you risk the assets being lost forever.
If your cryptocurrencies are held in a private centralised exchange (i.e. Coinspot, Binance, or Kraken), your executor will not be able to gain access to your account without your password. If you die and your executor has no way to get your password, they will need to contact the exchange directly to notify them of your passing.
Some exchanges will not give full access to your executor to trade and move coins, instead your executor will only be able to instruct the exchange to sell your cryptocurrencies and your estate will receive the cash proceeds. If you hold your coins in an exchange and want your beneficiaries to receive the coins rather than their cash value at the time of sale, you should take steps to ensure your executor will be able to access and move coins from the exchange.
If you hold your coins in a private wallet (i.e. Metamask, Ledger, or Exodus), your executor will need either your wallets password, or alternatively, the wallet’s seed phrase (which grants complete control of your coins). It is important to note that during your life time, it is extremely unadvisable to share your seed phrase with anyone and doing so poses a huge security risk.
Therefore, in addition to preparing a will setting out how you want your cryptocurrencies to be dealt with when you pass, we recommend preparing a separate document which sets out where each of your cryptocurrencies are kept (either the exchange or wallet), along with any passwords or seed phrases your executor will need to access them. This letter should be kept with your will in a secure location and not kept in any electronic form.
If you have any questions regarding cryptocurrencies and the law, or wish to discuss updating your will, please feel free to contact Nicholas Mountain, at our office to book an appointment.
