Cryptocurrencies are increasingly popular as an investment, but what happens to these digital assets when their owner passes away? For Australians holding crypto, it’s a question that requires consideration and planning.
Unlike traditional assets, cryptocurrencies are intangible and digital, making them uniquely challenging to pass on after death. They’re not typically held by banks or other institutions that can easily transfer ownership. Instead, access is controlled by private keys — long strings of characters known only to the owner.
David Kaplan, founder of online estate planning platform Willed, explains more: “Cryptocurrency presents a unique challenge in estate planning. If your loved ones don’t know about your crypto holdings or can’t access them, those assets could be lost forever.”
Legal status of cryptocurrency in Australia
In Australia, cryptocurrency is treated as property for legal purposes. This means it can be included in your estate and passed on to beneficiaries. However, the process isn’t as straightforward as with traditional assets. And it is thought that tens of millions of dollars in crypto remains unclaimed.
“While crypto is considered property, its intangible nature means special steps need to be taken to ensure it can be accessed and transferred after your death”, Kaplan notes.
Steps to protect your crypto assets
To ensure your cryptocurrency doesn’t disappear or remain inaccessible when you die, consider these steps.
- Include crypto in your will: Explicitly mention your cryptocurrency holdings in your will, specifying who should inherit them.
- Provide access instructions: Leave detailed instructions on how to access your crypto wallets. This might include wallet addresses, passwords, and recovery phrases.
- Use a “dead man’s switch”: Some services offer mechanisms that automatically transfer your crypto if you don’t log in for a specified period.
- Consider a crypto inheritance service or plan: Specialised services are emerging to help with crypto estate planning.
- Inform your executor: Make sure your executor knows about your crypto assets and how to handle them.
Kaplan emphasises the importance of keeping this information secure: “While it’s crucial to leave access instructions, you need to be extremely careful about how and where you store this sensitive information. It should be kept secure but accessible to the right people when needed.”
The role of exchanges
If your crypto is held on an Australian exchange, the process of transferring it might be slightly easier. Exchanges operating in Australia must adhere to various legal rules and regulations and typically have procedures in place for releasing assets to next of kin, although they typically require extensive documentation before they’ll do so.
If the deceased held their assets in a wallet on an offshore decentralised exchange, however, transfer of ownership may be significantly more difficult.
Looking ahead
Even if you are a HODLer, there’ll come a time when you can hold on no more. You can protect your investment and ensure it benefits your loved ones after you’re gone by setting up an estate plan and including your cryptocurrency in it.
