When it comes to estate planning, you need to make definitive plans for your cryptocurrency to ensure it isn’t lost in cyberspace or the subject of a Will dispute. Appointing a trusted executor for your bitcoin account can minimise any confusion for your heirs down the track.
What is bitcoin?
Bitcoin is a cryptographically protected form of currency that can be electronically transferred from person to person, rather than via a bank. This cryptocurrency has increased in popularity over the past few years and has found it’s way into the mainstream, with places such as Brisbane Airport accepting it as payment. While you can’t carry bitcoin in your purse, you can access this currency through a virtual wallet. These wallets are locked up with a public access key for sending and receiving currency, and a secondary private key to access the funds.
What happens to my bitcoin when I die?
Just as you would with your other assets, you need to make documented provisions for your bitcoin account in the event of your death. As cryptocurrency is a fairly new concept in the world of estate planning, it may be an asset that goes unrecognised or forgotten when your estate is being divided. For this reason, discussing your plans or expectations for your bitcoins with your appointed executor can make sure that they’re on the same page and have an understanding of the process and protocol when dividing this currency.
In order to benefit from your bitcoin account, heirs will need both your public and private security keys to authorise their access. For security reasons, it’s best that the passcodes themselves aren’t written directly into your Will. However, you can outline your wishes for the division of your bitcoin, whether it is to be divided among heirs or gifted to one sole party, and allow the executor to pass over the keys after the Will has been revealed.
In many cases, executors have been requested to hold onto the passcodes themselves, either in the form of a document or on a USB flash drive to pass on in the event of death. However, as a precaution, some bitcoin account holders have opted for a two-step security process where executors have only the passcode to a safe where the access details are hidden. As heirs may not understand or recognise the value of bitcoin, it is important that if necessary, you bequeath your executor to explain it to them and to assist them with the process. Furthermore, heirs need to be aware that bitcoin is considered an asset by the Australian Taxation Office for income tax purposes.
Any eligible persons are allowed to contest the contents of a Will – however cryptocurrency can get a little bit complex. If you’re looking to contest a Will, get in touch with the experts at Gerard Malouf & Partners Will Disputes Lawyers to assist with your claim.