Cryptocurrency is an intangible asset falling within the owner’s financial estate. If you paid your rands or dollars into a platform and bought cryptocurrency, that crypto forms part of your net worth and should, in theory, be able to transfer to your heirs on your death. However, as heirs to estates around the world have found, unless you leave detailed instructions on how to access your crypto accounts, those funds may be difficult to recover. Crypto account holders should take care to include their cryptocurrency in their estate planning so that their accounts are not lost should they die.
In 2018 Canadian crypto mogul Gerald Cotten, CEO of Quadriga Fintech Solutions, died suddenly at the age of 30. The untimely death of this crypto whiz (which many believe to be faked) bankrupted Quadriga because only Cotton held the passcodes to the company’s store of cryptocurrency, which was stored offline in “cold-storage”. Without Gerald, who left no records of the passcodes, approximately $180 million Canadian dollars-worth of cryptocurrency was lost to investors. This story highlighted the vulnerability of crypto-accounts (on any scale) when the owner dies and passcodes are lost.
Nowadays, the average user should be able to contact the platform they are transacting on, which hosts their crypto wallets, and inform them of the death of an account holder. This is much the same as any traditional account, where the executor of a deceased estate typically sends a death certificate and the will of the deceased to various financial institutions, banks and investment management companies. Thereafter, the traditional financial institution will provide the executor with access to the funds and transfer them to an estate account which can be distributed to the deceased’s heirs. Luno and Coinbase (only two of many cryptocurrency trading platforms) currently have provision for the death of an account holder and a system by which the executor of their estate may access these accounts. Practically, however, navigating the death of the holder of cryptocurrency is a new frontier and it can be difficult to accomplish, especially considering the bureaucracy of these large platforms and that their support is often hosted outside the country of the account holder.
It is recommended that account holders read the terms and conditions of the platforms which they hold cryptocurrency in, to ascertain if these platforms have a process for transferring funds to the account holder’s heirs after death. Even if there is a process, it would also be prudent for account holders to include these assets in a will and leave detailed instruction for their recovery with a trusted individual – bearing in mind that this individual will have the “keys” to the account and may access it at any time.
For assistance or advice on the inclusion of your cryptocurrency assets in your will and general estate planning, please do not hesitate to contact us.
About the author
Megan started her articles with Dunsters in 2020 and is a graduate of the University of Cape Town (B.COM PPE, LLB). Megan is in the commercial team at Dunsters and enjoys working on drafting all kinds of contracts as may suit our clients’ needs. Her areas of interest lie broadly in the commercial sphere, with a more specialised focus on technology and the law. Megan also writes and oversees the editing of our insights and articles.
In her spare time Megan is Chairperson of the Cape Town Candidate Attorneys’ Association, loves to paint and prefers to spend her weekends outdoors. Cold-water swimming, running and hiking, she is keen on all the outdoor activities Cape Town has to offer.