Crypto – Don’t let your digital assets die with you
An intro to Cryptocurrency
Cryptocurrencies, or “crypto-assets” as they are sometimes known, are a type of digital currency whose value is determined mainly through the powers of supply and demand as well as the underlying technology and is stored in a virtual wallet. The currency is supported by a technology called Blockchain, which in its simplest format, is a public ledger that can’t be changed.
A few of the most popular forms of cryptocurrency include:
Cryptocurrencies are regarded as an asset class in their own right and therefore are considered an asset in their owner’s estate.
What happens to my digital currency when I die?
With the increased attraction globally to crypto-currency, as well as the recognition of cryptocurrency as an asset class, many investors are now including crypto in their investment portfolios. However, this asset class is unlike more traditional asset classes and is not tangible (such as gold, currency or oil would be). It is also not as commonly transacted in comparison to cash and currency transactions. This lack of tangibility, as well as limitations of translatability, create uncertainty as to what happens to our cryptocurrency assets when we die.
What is the current legal stance on cryptocurrency?
There isn’t a concrete legal stance when it comes to cryptocurrency and inheritance. But what we do know for sure is that cryptocurrency is similar to property in that it can be owned, gifted and inherited.
If a person dies and the private keys are lost to a cryptocurrency wallet, then the cryptocurrency is essentially lost forever. This is because blockchains are highly secure and the entire process is decentralised, so there is no way to restore a private key.
What should I do?
As a basic starting point, this must be treated like any other asset would be. Creating a list of all cryptocurrencies you have with the following information would be the perfect starting point:
-Name of Currency
A step-by-step guide explaining how the beneficiaries can access those assets upon the execution of the estate planning instrument
Website/Platform access details such as user name or password must be given to your family and those whom you trust to manage your affair should you pass away as, without these, your crypto assets will be inaccessible
Secondly, assess the platform you have purchased the cryptocurrencies through. Some of these platforms make provisions for and allow for a beneficiary to be nominated. For those that do not, this is where the use of an effective will is exceptionally important as this will dictate to your executor how the asset is dealt with.
Understanding the Laws of the county you reside in is also an exceptionally important factor. The laws, depending on your jurisdiction, can dictate affairs such as capital gains tax, inheritance tax or Sharia ’h law
If you want to leave your digital assets to certain people in your will, there are important steps that need to be taken to ensure that your wishes are carried out. You will need to keep a note of specific instructions on how to access the private key in the wallet, all usernames for online accounts and any details on the public and private keys themselves.
UAE law on digital currencies and wills
It has recently been quoted that, under the UAE Federal laws, the status of crypto is currently not sufficiently clear to be certain about adding crypto to one’s will. “However, a UAE resident can use a DIFC Will so that it covers all his worldwide assets, including crypto assets. This is possible since DIFC applies the laws of England and Wales, which recognises crypto assets as property. DIFC Wills also have a provision for including a ‘sealed’ document so that potentially one may leave a private key for the beneficiary to receive and use to retrieve the crypto.”
With that being said, and in order to ensure you not only protect your digital assets but are inherited according to your wishes, a will and proper estate planning or succession planning exercise must be conducted.
About Mike Coady
Mike Coady is an expat expert based in Dubai and is on hand to help with all of the above and more.
Mike is an award-winning money coach and industry leader in the financial sector.
Qualified to UK Financial Conduct Authority (FCA) standards, a member of the Chartered Insurance Institute, a Fellow of the Institute of Sales Management (FISM), a Fellow of the Association of Professional Sales (F.APS), a Fellow of the Institute of Directors (FIoD) and featured as a highly qualified Financial Adviser in Which Financial Adviser.
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Blog published by Mike Coady.