Traditionally, when someone dies, their Estate (which a broad definition means their generic wealth) is collated by Executors and then distributed in accordance with their wishes as set out in their will OR by the rules that govern Intestacy if there is no will.
Times however are changing. Whilst it is easy for the Executors to write to a bank with a copy of the death certificate or grant of probate and request funds are sent to the Executor's bank account, it would be impossible to do so with regards to bitcoin that may be held in a password protected wallet or exchange.
How can bitcoin and digital assets be passed to the Executors on death?
Well, the obvious way is to leave password details in a will or a safe place to be passed to the Executors. The problem with this though is, passwords (can) regularly change. Without full access to the place your digital assets are stored, the only logical conclusion is that after death, the Executors will not be able to have access and that wealth will be lost forever.
This is not a post just about bitcoin, it is about anything stored electronically. For example, cryptocurrency, photographs, music, videos, the list goes on. Our lives are changing and we are increasingly dependant on electronic storage and cloud storage. Everyone is reminded how important it is to password protect all electronic devices and storage for fear of being hacked or accessed by prying third parties. But how many people actually store their passwords somewhere their loved ones or executors can have access in the event of death?
It poses a significant problem for anyone over the age of 18 and it is a problem that needs to be addressed. There are many hundreds (thousands) of law firms in the UK (millions no doubt around the world) who are able to draft a will for you. How many of those firms will discuss your digital assets, your bitcoin, your pictures, your music etc etc? This can not only lead to loss of value for the intended beneficiaries but could also lead to a potentially contentious probate dispute, if the BTC were not specifically bequeathed in a will and a spouse (for example) liquidated the BTC for their own benefit and not for the benefit of the residual beneficiaries of the will.
Another point I am often asked about is whether bitcoin or digital currency falls within an Estate for Inheritance Tax purposes. The answer is yes, if they are recoverable or identifiable they would be subject to Inheritance Tax as part of your Estate Value.
For now, you will have to decide how to manage your digital assets so that in the event of unexpected death, those who count can liquidate your digital wealth for your intended beneficiaries.
To speak with an expert bitcoin solicitor call 020 7792 5649 or email This email address is being protected from spambots. You need JavaScript enabled to view it.
