Around 2.3 million adults in the UK now hold cryptocurrency and 78 per cent of UK adults have heard of such crypto assets, according to recent research by the Financial Conduct Authority.
Cryptocurrency is a kind of digital or virtual money. It works in the same way as regular money in that it can be spent, saved or traded, but it has no physical presence. It exists only in electronic form.
Cryptocurrency such as Bitcoin, Ether and Ripple are often attractive to investors because of the blockchain technology that backs it. This is the encryption process every transaction undergoes. Another benefit is that it is stored in a digital wallet that can only be accessed by a private key, so it is very secure.
However, as Matthew Cooper, a Partner in the Private Client department at WBW Solicitors in Newton Abbot explains, the secure nature of cryptocurrency can spell problems if a deceased person does not leave proper instructions on how to access the funds.
According to a study by The Cremation Institute, 89 per cent of cryptocurrency investors worry about what will happen to their assets after they die. Yet, despite this concern and the very real risk of losing their crypto assets, only 23 per cent of investors have a documented plan to pass on such assets when they go.
As a result of this lack of planning, millions of pounds worth of crypto assets have already been lost because owners have died without leaving details of how to access their cryptocurrency.
Like any other assets, cryptocurrency can be bequeathed in a will; the problem is, where should details on how to access the funds be stored? Cryptocurrency owners are repeatedly warned not to share their access details with anyone and, since wills are a matter of public record following probate, such details should not form part of the will.
The access details could be stored at home, whether in paper form, on a computer or on a USB stick, but again this presents a security risk. Leaving access details with a lawyer may seem like an attractive plan, but this would effectively turn the responsible lawyer into a custodian which would be enough to make most law firms demur, particularly when added to the administrative challenges that usernames, passwords, and two factor authentication presents.
One safe method of ensuring that beneficiaries can access your cryptocurrency when you pass away is to buy and store it at a cryptocurrency bank and have the bank manage the keys on your behalf. This allows you to only notify your loved ones or your solicitor of details of the crypto bank and your account, rather than giving them access before you die.
Such storage with a custodian, however, is considered unattractive because it does not allow you to own or control your cryptocurrency.
An alternative option which gets round this downside is to store your cryptocurrency online in a non-custodial, multi-sig wallet. As long as you sign up to a cryptocurrency inheritance solution scheme, you get full control of the assets and can give two independent parties the opportunity to jointly retrieve the funds if required.
Cryptocurrency can be an important and significant part of your estate and it would be a veritable tragedy if you passed away without leaving your loved ones details of how to access it. To gain peace of mind you should speak to a specialist private client solicitor who can talk you through your succession plan options and ensure your hard-earned digital cash is passed on in the manner of your choosing.
For more information on managing your cryptocurrency bequests, or any other private client issue, contact Matthew Cooper at WBW Solicitors in Newton Abbot on 01626 202418 or email email@example.com.
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.