The average crypto investor probably doesn’t plan to die of old age, but that doesn’t mean they don’t have plans to deliver their crypto if the unlikely happens, lawyers warn.
Speaking to Cointelegraph, Dubai-based crypto lawyer Irina Heaver believes that “billions” of Bitcoin (BTC) have been lost due to lack of death-related planning by hodlers.
He noted that many families cannot access the crypto assets of their loved ones because the private keys are taken to the grave, and emphasized the importance of discussing crypto assets with the family and including them in their will.
Heaver said the typical crypto investor is a “male millennial” between the ages of 27 and 42, which is the age range where managing one’s financial affairs in the event of death is “the last thing” that comes up in conversation.
However, the lawyer believes that it is “important” to confirm that the administrator of the will is smart to use cold and hot wallets to properly distribute one’s ownership.
Digital asset lawyer Liam Hennessy, a partner at Australian law firm Gadens, believes that crypto investors should understand that the “vanilla first step” to protect their family’s future is to prepare a will – but also remember that crypto is a complex asset. and the will must include specific instructions about where the crypto is and how the keys are accessed.
Heaver has observed “huge problems” in the crypto inheritance process, including cases where families approached him for help accessing their loved ones’ crypto assets.
Digital assets lawyer Krish Gosai, who manages Gosai law partners, believes that it is very important to inform beneficiaries about crypto because of the lack of understanding about digital assets.
Gosai believes it is important to inform the executor of the will or loved ones about the existence of crypto assets but advises not to share sensitive login information or seed phrases, saying it is unnecessary.
He suggests that, if necessary, the seed phrase can be divided into four family members.
Tax implications
Crypto inheritance can also be complex due to differences in tax structures between jurisdictions.
Heaver added that in some jurisdictions, there is an inheritance tax. For example, in the UK, crypto assets will be “liable” to inheritance tax on the death of the owner and capital tax on legal disposal.
related: Answering the morbid question: What happens to Bitcoin when you die?
In Australia, there is no inheritance tax, but Heaver notes that there is a capital gains tax if a person disposes of assets inherited from a deceased estate.
He noted that there are jurisdictions where there is no tax, like the Arab Emerites Union.
Digital asset lawyer Liam Hennessy, a partner at Gadens, added that figuring out digital assets at the best price can be another complication, due to factors such as price fluctuations and smart execution protocols.