Investing in cryptocurrency has become increasingly popular in recent years and some savvy individuals have been able to use this new strategy to grow their wealth.
If you have been active in this area, it’s important to include your crypto assets in your Will. Your legal team and beneficiaries need to be aware of your activity and be able to access your account.
A brief definition of cryptocurrency
You may have heard the terms ‘crypto’, ‘blockchain’ and ‘Bitcoin’.
Cryptocurrency is the term used to describe digital or virtual currency that uses cryptography for security and operates independently of a central bank. The most well-known cryptocurrency is Bitcoin, but there are others such as Ethereum, Dogecoin, and Polkadot.
Cryptocurrency transactions are recorded on a decentralised digital ledger called a blockchain, which ensures transactions are secure and cannot be altered. Like other forms of investments, cryptocurrency can be bought and sold on exchanges.
Including your cryptocurrency investments in your Will
When you pass away, your legal team, your Will Executor and your beneficiaries need to know what to do with your belongings, and this includes any cryptocurrency investments you have made.
Part of the reason this is important is because crypto is relatively new. There aren’t clear legislations around distributing this kind of asset after someone passes away in Australia. If you don’t make it very clear what your wishes are, your beneficiaries may never even know you have a crypto account. If they are aware of it but you haven’t left any instructions about distributing the proceeds, they can wind up in a dispute, which is costly, frustrating and time-consuming.
When you create your Will, keep in mind that you may need to update it. Crypto investments have proven to be volatile so if you leave someone your entire crypto ‘fortune’ and nothing else, you need to keep an eye on its value and rearrange your Will if things change dramatically.
What to include in your Will in relation to cryptocurrency
When including cryptocurrency in your Will, be clear about this asset but don’t necessarily include the login details for your crypto wallet (which is where your crypto is stored) in the Will itself.
Make sure your Executor has access to information about the account, but store the login and password details somewhere safe, for example with your lawyer.
How you divide the proceeds of your crypto investments in your Will is up to you but speak to your legal team if you need specific advice.
Tax implications of cryptocurrency in your Will
Another important consideration when including cryptocurrency in your will is tax.
Cryptocurrency is treated differently than traditional assets for tax purposes, and it is important to understand the implications of transferring your cryptocurrency assets to your beneficiaries.
In Australia, cryptocurrency is treated as an asset for tax purposes, which means that any gains or losses on the sale or exchange of cryptocurrency are subject to capital gains tax. If you transfer your cryptocurrency assets to your family or other loved ones after you pass away, they may be responsible for paying capital gains tax on any gains that occur after your death.
If your investments are significant, you may need to speak with an accountant as well as your lawyer to get an idea of how growth in crypto value may affect your beneficiaries’ tax.
Give yourself and your family peace of mind about all your assets, including cryptocurrency. Reach out to Crest Lawyers to start preparing your Will today.
Disclaimer: The information contained in this news post is general in nature and is intended to provide a general summary only and should not be relied on as a substitute for professional advice. Whilst the information is considered to be true and correct at the date of publication, changes in circumstances after the time of publication may impact upon the accuracy of the information.