What to do if you are left cryptoassets in a Will?
In May, Irwin Mitchell hosted the 2022 First Law International Conference in Manchester. As part of the packed schedule of activities, delegates took the opportunity to sit down with like-minded colleagues from law firms and businesses across the globe to discuss the themes, trends, and topics we are all seeing in the Financial Services sector.
It was an interesting conversation giving real food for thought, and discussions around cryptocurrencies and NFTs featured prominently. One question posed was how cryptoassets left in a will – for instance, if left to a charity as a donation – would be handled?
Access
The first issue will be for the executors to consider where the cryptoassets are located and how to access them. If the deceased left detailed instructions, the process will be much easier. Often, however, the deceased will not have provided detailed instructions. The executors will therefore need to take steps to locate the cryptoassets. Generally, cryptoassets will either be held on an exchange platform or held in a private wallet. Steps the executors can take include searching through bank statements to see whether monies were transferred to a cryptocurrency exchange or hiring an expert to search the deceased’s digital devices (i.e. smartphone, computer) for any cryptocurrency wallets.
If the cryptoassets are held on an exchange platform, such as Coinbase, it is possible to access the cryptoassets by providing certain documents such as a copy of the death certificate, the Will, identification etc. Unfortunately, if the cryptoassets are held in a private wallet but you do not have access to the private key, it will be impossible for you to gain access to the cryptoassets. That is why it is important for cryptoasset owners to prepare a memorandum with detailed instructions including how to locate and access their private key.
What to do with cryptoassets
Assuming the executors have access to the cryptoassets, as with any traditional asset, you will need to decide whether you want to accept the gift of the cryptoassets or not.
If you decide to disclaim the gift, the cryptoassets will fall to the residuary estate. However, if you decide to accept the gift, you will need to consider whether you wish to keep the cryptoassets or sell them. In either case, we recommend you seek advice from an expert.
If you choose to keep the cryptoassets, you can have the cryptoassets transferred to your own private wallet or to your own cryptocurrency exchange account. Alternatively, you can ask the executors to sell the cryptoassets on your behalf to receive the cash proceeds instead. It is important to remember that cryptoassets are volatile and therefore the cash value cannot be guaranteed. You would also need to consider the tax consequences. The sale of cryptoassets may give rise to a capital gain subject to capital gains tax.
Seek advice
Leaving cryptoassets to your loved ones requires more foresight than traditional assets. The best thing to do whether you own cryptoassets, are administering an estate including cryptoassets or are the beneficiary of cryptoassets in a Will, is to seek legal advice.
