Kyle Abrahams Admitted Attorney and Legal Advisor at BDO South Africa.
If you’ve accumulated crypto assets, it goes without saying that you must explain how you want them to be distributed in your Will. BDO’s Kyle Abrahams sheds some much-needed light on a little-discussed issue.
In recent years, the global market has opened itself up to a whole new idea of trade…a cashless society! Cryptocurrency (crypto for short) are intangible digital assets that are not issued by a central authority. As an unregulated currency, crypto is controlled by the developers themselves. These days, crypto can quite easily be converted into cash.
Since 2009, crypto has soared in popularity, with the likes of Litecoin, Ethereum, and the most popular of them all, Bitcoin, becoming household names. Statistics show that there are 200-million crypto users globally and 18,000 businesses (and counting) that accept cryptocurrency payments. For the millennials and festival goers out there, Howler is an example of a business that has gone completely cashless. With 4.2 million crypto owners, South Africa ranks in the Top 10 ‘crypto nations’ in the world.
A quick disclaimer
This article will cover the specifics of crypto and estate planning. If you would like a basic primer on how crypto works and why it should feature in your financial plans, this piece is a good place to start.
Crypto and your Will
Being an intangible asset, Crypto is seen as property in terms of the Estate Duty Act and estate duty is therefore applicable on the value of the asset at date of death. That said, the value of your digital wallet must be taken into account when planning your estate.
If you have accumulated crypto assets it follows that you should include them in your Last Will and Testament. Here, I strongly recommend a two-pronged approach:
- Include a clause in your Will detailing how you want your crypto assets to be distributed.
- Create a separate letter of directions to your nominated beneficiary and/or executor which explains where and how to access your crypto assets.
Step 1: The clause in your Will
As always when drafting a Will, it is highly recommended that you seek the services of a professional. The clause can follow the same format as the rest of your will: you simply have to detail who should inherit your crypto assets and in what ratio.
As crypto is a recently recent phenomenon, I would strongly recommend following this up with an explanation along the following lines:
My cryptocurrency might be stored on digital wallets, paper wallets, online exchanges, or a combination of wallets and exchanges or any other crypto digital platform. The following items or devices might contain a cryptocurrency wallet: [type of cryptocurrency (i.e Bitcoin, etc.)].
These items shall not be distributed to any person until such time as the cryptocurrency or any information related to the access of my cryptocurrency is transferred to [nominated beneficiary]
It is also really important that you specifically state in your Will that you have created a separate letter of directions that explains how to access your crypto wallets and accounts. You also need to mention where this letter is held (typically with the Executor of your estate).
Step 2: The letter of directions
This letter should detail where all of your crypto assets can be found and must include the keys, usernames and passwords required to unlock them. Depending on who will be inheriting your crypto, it is probably a good idea to include detailed instructions on how to convert the crypto into cash should your beneficiary opt for such.
It is of utmost importance that this letter of instructions is NOT filed with your Will. If included in your Will this information will be lodged with the Master of the High Court and thus enter into the public domain. Including this info in your will is akin to giving your ATM pin to strangers!
The bottom line
While it may not be as widely understood as cash, shares or bonds, crypto is an asset like any other. If you have accumulated crypto assets then they must be dealt with in your Will. Should you not include it, your crypto will be lost.