How is cryptocurrency different to other assets in a will? Sharon Henley, Chief Product Officer at Coincover, explains how best to handle cryptocurrency assets in your will.

What is cryptocurrency?

Cryptocurrency, sometimes referred to as simply ‘crypto’, is a digital asset that can be bought, spent, saved or sold. The difference between cryptocurrency and traditional money or assets is that cryptocurrency is secured, distributed and traded using special ‘blockchain’ technology on decentralised computer networks.

At the time of writing, the largest digital currencies by market cap are currently:

• Bitcoin
• Ethereum
• Binance Coin
• Ripple

People store cryptocurrency in what is called a digital wallet, which can be hardware-based or web-based. In order to access this digital wallet, users must have their cryptographic keys, which come in the form of a private key and a public key. The easiest way to understand public and private keys is to think about how email works:

• Your email address is public so anyone can send you an email. Providing the public key to your wallet means anyone can send you cryptocurrency.
• You do, however, need a log-in and password for you to read the emails sent to you. And so, it’s the private key that lets you move funds (or send funds) out of your wallet, from one person to another securely. Just like with your email log in and password, these private keys must always be kept secret as they are the only thing protecting your digital assets.

How is cryptocurrency different to other assets in a will?

Like any other asset, cryptocurrency can be part of a deceased’s estate (money, property and possessions) and be left in a will to beneficiaries (the person(s) inheriting). However, stating who cryptocurrency should be left to is the easy part. The hard part is having the ability to access and transfer it.

Unlike property, for example, where physical access can be as simple as signing some papers and the turn of a key, it’s not possible to access cryptocurrency without holding the private key, which, as stated earlier, should be kept as secret as possible.

Millions of pounds worth of cryptocurrency has been lost forever because owners have died without leaving a contingency plan. According to a 2020 study by the Cremation Institute, nearly 90 per cent of all cryptocurrency owners are worried about what will happen to their crypto when they die, but rarely do they make provisions for ensuring it is not lost forever.

Can someone access a cryptocurrency wallet without the private key?

Even if a beneficiary is explicitly named in the will as being entitled to someone’s cryptocurrency, it’s simply not possible for them or a personal representative (the person(s) responsible for distributing assets in a will) to access a digital wallet without holding the private keys. Even if you know the crypto exists and you can see that it is sitting in a wallet on the blockchain, without the keys there is no way to access it. Therefore, owners of cryptocurrency should always have a contingency plan in the event of their death.

Where should you leave details of your private key?

In your will?

You should never leave details of your private key in your will. We are all told never to share our passwords and never to share our pin numbers, and this should still be the case when writing a will. This is particularly relevant given wills become a matter of public record once probate has been obtained. Anyone that knows how crypto works could easily read and use the keys to obtain all the crypto before the rightful beneficiary is able to do so.

Leave instructions?

Some cryptocurrency users leave specific instructions on how to access the private keys, all usernames for online accounts and any details on the public and private keys. But how safe is this? Even if a user was to leave their details with the likes of a lawyer, it still wouldn’t be simple to retrieve. Passwords are changed regularly and are also tied to 2FA (Two-Factor Authentication); this means that access to a secondary device, such as a phone, would also be needed. Leaving cryptographic keys with a lawyer would also deem them a custodian and most lawyers are not set up for this.

Multi-person access control

There are several ways to ensure that cryptocurrency assets are accessible by your loved ones when the times comes and in a way that doesn’t compromise safety and security in the meantime:

1. Purchase and store cryptocurrency at a cryptocurrency bank and have the bank manage the keys on your behalf. This will mean that you just need to leave details of the crypto bank and your account with your loved ones. However, this does mean that you won’t actually own your cryptocurrency or have control of it as it will be stored with a custodian.
2. Store your cryptocurrency online in a non-custodial multi-sig wallet and sign up for a cryptocurrency inheritance solution. Here you keep full control of your assets in your own wallet, with your own keys but in the event of a loss of access, or death, the services provides for two independent parties to come together to retrieve the funds on your behalf. In this instance you’d be provided with a beneficiary card to give you loved ones, identifying who to turn to should the unexpected happen.
3. Hold your cryptocurrency on a hardware wallet in which you have stored a copy of the private keys for the wallet, or the 12-word seed recovery phrase for the wallet along with step-by-step instructions on how the wallet can be access in a safe-deposit box or vault.

About the author

Sharon Henley is the Chief Product Officer at Coincover who has experience protecting cryptocurrency assets for businesses and end users alike. Coincover has a mission to make digital currency investments simple, safe and secure for everyone and works across the globe to protect digital assets from theft, lost access and even has a solution for Cryptocurrency Wills.

See also

What happens to your social media accounts when you die?

How to write a will

Lawyers struggling to access inheritance locked in digital accounts

Find out more

Check if you need to pay tax when you sell cryptoassets (GOV.UK)

Image: Getty Images

Publication date: 5 May 2021

Any opinion expressed in this article is that of the author and the author alone, and does not necessarily represent that of The Gazette.