When a person dies after having made a will, his estate is transferred to his personal representatives and subsequently to the person or persons designated as beneficiary, once the administration of his estate is completed.
If a will has not been prepared, the personal estate of the deceased is divided among the surviving family members in accordance with the terms of the Succession Act 1974, after the administration of his estate is completed.
Bermuda’s Wills Act 1988 defines “personal property” to include leasehold property, corporate shares and chattels, among other forms of assets, and “all other property which by law requires are the responsibility of an executor or administrator ”.
But how do you deal with crypto assets?
They are not tangible and therefore incapable of being things in possession.
However, they hold a value that an individual has the right to own and transfer.
As ownership evolves, as with crypto assets, the methods used to preserve and pass them on in the event of death must also evolve.
The main concern of leaving crypto assets in a will is to ensure that they can be viewed and transferred to designated beneficiaries.
Crypto assets can be stored in different ways.
For example, cryptocurrencies like bitcoin can be held in crypto wallets, each of which has an address with an alphanumeric identity longer than 30 characters that acts as a pseudonym for the identity of the actual owner.
The most common types are hot and cold wallets.
Hot wallets are described as online cryptocurrency storage software, but because they are online, they can be susceptible to cyber attacks.
Cold wallets are offline storage devices and therefore tend to be more secure.
Regardless of how a crypto asset is stored, an individual needs an access key code to access it.
Two high profile cases show how crypto assets were lost.
In 2018, the CEO of Canadian crypto exchange QuadrigaCX, Gerald Cotten, passed away suddenly at the age of 30.
His $ 190 million in crypto assets was inaccessible because he was the sole holder of the company’s private keys and cold wallets – and hadn’t shared those details with anyone.
That same year, Mathew Mellon died at age 54, but his $ 500 million worth of cryptocurrency was also lost.
Mr Mellon had stored the private keys to his crypto assets in cold wallets distributed at various banks, but he had not told anyone where they were.
These examples show how easy it is to lose access to cryptocurrencies, and highlight the importance of creating a plan that executors and beneficiaries should follow when managing an estate, especially when it comes to managing an estate. concerns crypto assets.
When drafting a will, special attention should be paid to instructions on how to access crypto assets so that they can be transferred to the intended beneficiaries.
Most importantly, beneficiaries should be given clear instructions on how to access crypto assets.
In Bermuda, a will becomes a public document once it is probated.
It is therefore not advisable to note the wallet address and / or the access key code in a will, as no one would want this sensitive information to become accessible to other than the intended beneficiaries of the crypto assets. .
In order to ensure that crypto assets are kept safe and available for transfer to the beneficiaries of the estate, individuals should provide a detailed plan of how their crypto assets are held over their lifetime and how they are to become. accessible to the beneficiaries of their inheritance upon their death. .
For example, a cryptocurrency bank may hold crypto wallets and their access key codes on behalf of individuals.
Instructions may be left with the bank to grant access to executors and beneficiaries. This way, wallet details and private key codes remain private and are only disclosed to those who are entitled to them.
Another way to transmit crypto assets is to keep the cryptocurrency in a cold offline wallet and store the private access key information in a safe, while ensuring that detailed instructions are left behind. on how to access the safe and wallet.
As more people start to diversify their portfolios with crypto assets, they need to make sure they have a detailed plan to preserve and pass those assets on when they die.
They should also consider seeking advice on whether they should set up a trust or hire a custodian to hold their crypto assets on their behalf.
In any case, owners of crypto assets should carefully review their estate planning to ensure that their assets, and more specifically their crypto assets, can be passed securely to their beneficiaries.
Caljonah Smith is Senior Associate in the Private Client & Trusts department and Karim Creary is an intern in the Corporate department of Appleby. A copy of this column is available on the firm’s website at www.applebyglobal.com.
This column should not be used as a substitute for professional legal advice. Before proceeding with any matter discussed here, people are advised to consult a lawyer.
Caljonah Smith is Senior Associate in Appleby’s Private Client & Trusts department (Photo provided)