Written by Anna Coakes
It is quite impossible to avoid the seemingly never ending press which has focused on the surge in demand and value of Bitcoin recently. In amongst the articles was an interesting piece about a man in Colorado, USA who died suddenly leaving a small fortune arising from his investments in Bitcoin. It raised the question; what happens to these crypto investments when someone passes away and how can you ensure that any wealth that may have accumulated is protected and passed on to beneficiaries or next of kin?
As most will know, Bitcoin is extremely volatile. Indeed, this year alone it has increased 1765% from a starting price in January of £640 and rising to a current figure of £12,682 per Bitcoin. What this illustrates of course is that there are those in the world who now find themselves with an affluence that they perhaps never expected to achieve.
The word crypto, stemming from the Latin ‘kruptos’, meaning hidden or secret, is applied in describing this new-wave currency due to its cryptographic nature. This secretive nature on the one hand is what attracts some to use Bitcoin, as each transaction is anonymous as to the personal identity of whoever is behind it. These purchases or transactions are therefore more discrete than any other form of payment currently available. Of course what this means is that there is no way of telling who owns the Bitcoin and to what extent the size of their holdings may be, unless the person holding them makes this information explicitly known.
Furthermore, in order to facilitate a Bitcoin transaction there needs to be in existence a “public key” and a “private key”. Your private key is what you keep either in an online wallet or a hardware wallet and is what allows Bitcoins to be utilised. It may help to take a moment to visualise this as a bank vault which can only be opened with a singular key which is completely unique and incapable of being copied. The only person that can retrieve what is inside that bank vault is the one who holds the key and therefore the safekeeping of it is of paramount importance to accessing the value within that vault. If you lose the key, you lose the access and potential value of whatever is inside forever.
Thus, this is the reason why Bitcoin investors are cautioned by well-known software wallet providers, such as the commonly used company called Coinbase, to share their private keys with their family or trusted friends by writing them down in a secure location or saving the key with a commercial service tasked with managing these access codes. Nevertheless, there is bound to be many an instance in the future where cryptocurrency assets potentially worth thousands or perhaps even millions of pounds are simply rendered inaccessible since the keys to access them have not been made known to relatives who may, when the time comes, benefit substantially from these investments.
Therefore, and in order to address this potential issue, it is likely to become increasingly important to document these private keys in a safe and secure manner, to be held together with your Will, so that your executors can gain access to those crypto assets after your death. All being well, this will go some way to avoid the modern day equivalent of Grandad passing away with his valuable stock certificates going undiscovered in his old shoe boxes.
Thank you to Kieran Forsyth, trainee solicitor in our Private Client department, for his help in preparing this article.
Disclaimer: This document is for informational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.
Contact the Author
I qualified with a BA/LLB University of Newcastle (NSW), College of Law – Diploma of Legal Practice in Sydney (NSW), before being admitted as a solicitor to the Law Society of England and Wales in 2006. I have 15 years post qualification experience and my practice areas include Probate and Administration of Estates, Wills, Inheritance Tax and Trusts. I currently spend 40% of my time working for uncontested probate. I am Member of STEP, a Solicitor of the Supreme Court of NSW and a Solicitor in England and Wales. Outside of work you can find me cycling, or on muddy dog walks in the country.