There are many people who are currently using cryptocurrency such as Bitcoin, Ethereum and Dogecoin as modern investment methods. However, very few people consider what happens to these investments should they pass away and how to treat these when doing their estate planning.
Cryptocurrency can be difficult to track. This creates one of the first problems with cryptocurrency and estate planning. That is, it may be difficult for the Executors to know that you have cryptocurrency if it is not specifically mentioned in your Will and estate planning documents.
You should mention the specific details of your cryptocurrency in your Will. Most cryptocurrency is held in a what is colloquially known as a ‘wallet’. These wallets are digital storage facilities that can be located on various devices, such as a laptop or smart phone. Some wallets might even require a special device to access, such as a USB stick or other security key device.
It is therefore vital that the correct instructions to access your cryptocurrency is provided with your Will. This information should not be specifically mentioned in your Will, but held in an Estate Dossier / Manual for your Executors. This guide can direct the Executors on how to access the currency, website links, the location of wallets, provide a paper copy of blockchain address, a guide on where to locate PIN details etc.
Cryptocurrency will be treated as an asset and not as cash and therefore there may be tax implications upon your Estate. If the Executor(s) of your Estate converts your cryptocurrency to cash the Estate may incur Capital Gains Tax (CGT). The ATO identifies the following as possibly being CGT events:
- sell or gift cryptocurrency
- trade or exchange cryptocurrency (including the disposal of one cryptocurrency for another cryptocurrency)
- convert cryptocurrency to fiat currency (a currency established by government regulation or law) such as Australian dollars, or
- use cryptocurrency to obtain goods or services.
While cryptocurrency might be an interesting modern way of investing it does present some serious concerns and issues in relation to Wills and Estates.