Despite technological advances in the world of cryptocurrency, the UK’s law is behind. After someone dies, executors may have difficulty obtaining legal title to online assets. However, advisors and clients can take the following steps by Yuan pay Group to ensure that valuable crypto assets are safe after death.
1. Determine which cryptocurrency assets are available
Especially for crypto assets such as Bitcoin, advisors should ask clients whether they own and hold any online assets. A deceased person’s representatives or advisors are unlikely to know purely online holdings if they were not given knowledge of their existence before death. A loved one may never find them if they use cryptocurrencies because of their anonymous nature.
2. Make an inventory of digital assets
The best advice for clients to ensure their digital lives remain accessible to the next generation is to identify all their online accounts and keep a detailed inventory of them. If you have a client with cryptocurrencies, you will need to provide instructions for retrieving their private key from their crypto wallet before using the currency.
The inventory should include the details of any third-party providers clients are using to hold their cryptocurrency (such as a custodian, an online wallet provider, or a crypto exchange).
3. Maintain up-to-date and secure inventory
The inventory, however, must be updated regularly and stored securely to be effective. The keychain must contain the public and private keys for the cryptocurrency accounts and a checklist of the passwords for accessing computing devices and online versions.
An inventory of this kind must be secure. Password management sites are available online. A client’s solicitor should also store an inventory with the Will.
4. Letters of wishes and wills
After someone dies, their Will becomes public and should not contain an inventory.
If possible, a Will (or a letter of wishes) should also include instructions to the executors on how to administer an individual’s digital estate, such as what accounts are to be closed down, transferred to heirs (if possible), or memorialized, for instance. It is still helpful for executors to have as much information about the deceased’s wishes, even if they conflict with some service providers’ Terms of Service. The internet is encouraging more and more people to share their lives, so this will only increase in importance.
In the event of mental incapacity, advisers should recommend the establishment of a Lasting Power of Attorney. Ensure that the attorney is explicitly authorized to handle any crypto assets owned by the client (although, of course, the attorney needs access to the client’s crypto wallet and private key to do so).
5. Using trusts
It is pretty common to use Will trusts to create an estate plan after death (or during life) when estate planning. Despite blockchain technology’s durability, cryptocurrencies are still too volatile and regarded as risky for them to become a trust investment.
Trustee professionals may be willing to administer trusts containing cryptocurrencies managed by reliable third parties, but their interest in risk will vary. Trustees are responsible for investing prudently and diversify their assets, so managing volatile cryptocurrencies can be challenging. In the next installment, we will explore in further detail issues related to trustees who hold crypto.
Cryptocurrencies like bitcoin will never go away. Its adoption by institutional investors will determine whether it becomes more mainstream. In the future, though, more and more wealthy clients and individuals will invest in cryptocurrencies, increasing the complexity of estate planning in this area.
6. A deceased individual’s crypto assets were seen
In the absence of identifying and accessing the deceased’s digital property, it cannot vest with their beneficiaries. According to cryptocurrency data firm Chainalysis, around 18.5 million Bitcoins are currently in existence, and approximately 20 percent of these (worth around $140 billion) have been lost online. We discussed in this article the importance of recording the details of any crypto assets held by an individual in a secure inventory as part of estate planning. You should gather all passwords, usernames, and private and public keys for cryptocurrency accounts in the stock.
7. Taking possession of cryptocurrency
The PRs can effectively acquire crypto assets once they have located addresses and private critical information about them. It is not necessary to grant probate in every case.
Crypto asset access information should be securely set aside by PRs as well. Recent cautionary tales teach us to be careful with USB drives, such as the one thrown out by James Howells. Their USB drive contained bitcoins worth more than £200m. Despite his promise of a £50 million share if recovered, Newport Council has refused to let him search the landfill site.
Before disposing of crypto assets, PRs should verify the deceased’s title and perhaps find proof of the purchase. This is to ensure no one else has a better claim to the support. A grant does not provide the PR’s authority to manage the assets in the deceased’s estate. But it does prove the PR’s authority to transfer and sell digital assets.
8. Investing in cryptocurrency assets and distributing them
Upon having full possession of the crypto assets in their wallet or account, PRs may take action by transferring them. They can do this accordance with their own Will or the intestacy rules. Taxes on crypto assets will be levied similarly to conventional investments, as outlined below.
Before selling cryptocurrency, public relations professionals should use a specialist broker or sell cryptocurrency like digital Yuan through an exchange (e.g., Coinbase).