Cryptocurrency in Deceased Estates: How are we ever going to deal with this?
Cryptocurrency has emerged as a large part of the growing economy today with Bitcoin alone selling for around $56,000.00 AUD a coin. You may think, if someone dies, how will they transfer this asset?
What is Cryptocurrency?
Cryptocurrency is an online digital currency, there is no physical form, and it can be used for a variety of purposes, some good and some bad. The funds are controlled by code, absent of any banking institution, and it is stored on hard disks or on online platforms such as Binance, an app designed to hold an online wallet.
Blockchain is used for cryptocurrencies and this code allows all transactions to be stored and saved. It is primarily used due to the absence of government control and the ability to make large sums of money. There are thousands of different coins which allow you to purchase anything online and allow you to invest and save.
Deceased Estates and Cryptocurrencies
You need to let people know you own these assets, otherwise, they may be missed and your beneficiaries may miss out. Below are the options you can take to ensure that these assets are dealt with appropriately:
- Tell your Executor/family members. Make sure they know you have these assets and that they know where they are stored.
- Ensure that they have access to these assets. For example, if they are stored on a hard drive, this hard drive must be accessible and readily available, also making sure that all passwords and encryption are lifted. You may store your cryptocurrencies in a bank safety deposit box, you may even have multiple signatures on your wallet so that access can be made by any other party on your death.
- If you own cryptocurrencies through an app, there usually is a wallet where you will hold these coins, these platforms allow you to nominate a beneficiary if something does happen to you, usually, the Executor will have to contact these platforms to arrange for the sale or transfer of these coins. Some platforms have a deadman’s switch, this switch is activated on your death, and this then allows the coins to be transferred immediately without any work for the recipients or the Executor/Administrator.
- If a capital gain occurs on the sale of these coins, there also may be a capital gains tax liability on the estate. This is a consideration you will need to make when nominating a beneficiary, and a consideration your executor will have to keep in mind when dealing with the estate.
Rules
The New South Wales Supreme Court requires the Executor to outline all assets of the estate on the application for Probate. The Administrator must also outline the assets of the Estate in the application for Letters of Administration. If down the track Probate or Letters of Administration has been granted and an online wallet is discovered, a supplementary affidavit to the court can be made to ensure that the assets of the estate are known to the court.
A platform will require evidence of death, a copy of a Will, and if the assets are larger than $50,000.00 AUD in most circumstances, then a copy of Probate or the Letters of Administration.
In Australia, there are rules and regulations relating to Capital Gains Tax, if a wallet has made a capital gain, and the coins are then sold, there will be a capital gains tax liability and the estate will have to pay this. It is important that you think about what gift is given to beneficiaries and what taxation liability they may be inheriting.
What does the future hold?
The Australian government on multiple occasions has hinted at the possibility of a cashless society, with many stores not offering cash payment, the increased online currency world is most likely to expand and provide everyone the opportunity to invest.
It is important though that if you are in doubt about your legal responsibility regarding reporting coins and ensuring that you obey the law, you talk to a lawyer.
RN LEGAL has assisted many clients with Cryptocurrency concerns. RN LEGAL has the experience, expertise, and resources to help you with such matters. Contact RN LEGAL on (02) 9191 9293 or [email protected] if you, or someone you know, requires advice or assistance in relation to any aspect of Cryptocurrency or online currencies.