The average crypto investor probably doesn’t plan on dying of old age anytime soon, but that doesn’t mean they shouldn’t have a plan to pass on their crypto in case they meet an unlikely death, lawyers warn.
Speaking to Cointelegraph, Dubai-based crypto lawyer Irina Heaver believes “billions” worth of Bitcoin (BTC) were lost because Hodler failed to do proper death planning.
Noting that many families did not have access to their loved ones’ crypto assets due to private keys being taken to the grave, she stressed the importance of discussing crypto assets with 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 group where managing one’s financial affairs in the event of death is the “last thing” to talk about.
However, the lawyer says it is “essential” to confirm that the executor is able to use cold and hot wallets to properly allocate one’s holdings.
Liam Hennessy, digital assets advocate, partner at Australian law firm Gadens, believes crypto investors should know that the “first step” in securing their families’ future is to make a will – but they should also consider that crypto is a complicated asset and that the will needs to have really specific instructions about where the crypto is and how the keys are accessed.
Heaver has observed “major problems” with crypto inheritance, including one case where a family approached her asking for help accessing the crypto assets of a deceased loved one.
Digital asset lawyer Krish Gosai, managing partner of Gosai Law, believes that due to the lack of understanding of digital assets, it is particularly important to educate beneficiaries about crypto.
Gosai believes it is important to inform the executor or loved ones of the existence of crypto assets, but advises against sharing sensitive credentials or seed phrases as it is not required.
He suggested that the seed phrase could be split between four family members if needed.
Inheriting crypto can also be complex due to differences in tax structures between jurisdictions.
Heaver added that some jurisdictions have estate taxes. For example, in the UK, crypto assets become “subject to” inheritance tax on the death of the holder and capital gains tax on a valid disposal.
Related: Morbid Question Answered: What Happens to Your Bitcoin When You Die?
There is no inheritance tax in Australia, but Heaver noted that there is a capital gains tax if you dispose of an asset inherited from a deceased.
She noted that then there are jurisdictions where there are no taxes, like the United Arab Emeritus.
Liam Hennessy, Digital Asset Attorney, Partner at Gadens added that realizing digital assets at the best price can present another complication due to factors such as price volatility and smart execution protocols.