Ten years ago if someone were to mention cryptocurrency you might be forgiven for thinking they were discussing the cost of a tomb. Fast forward ten years and we now live in a world where the mention of digital gold or cryptocurrency is barely escapable.
It’s here and judging by the new digital currencies that are emerging almost on a daily basis it’s here to stay. Many dealers now talk of first, second, third and even fourth generation currencies. Blogging, by high profile figures, the recent adoption of Bitcoin by Tesla and of course the on-going saga of SEC v Ripple, has created a universal interest coupled with of course massive rises in value. Added to this with the now easy accessibility of purchase through the various ready-made platforms it’s safe to predict that for the foreseeable future that investment will continue.
So what does this mean for the paralegal probate practitioner? It means that you have to think about these investments differently when advising a client on setting down their assets in a will.
Crypto currency is different to mainstream investments. As stated above it is held digitally in either electronic wallets (which you can buy) or on a computer platform. You make your purchase and watch the numbers of your units go up. In essence an electronic money box and like a conventional money box very difficult to determine what is actually in it, unless you’re the owner or have means of accessing it. In addition, unless a client reveals its existence it is not going to easily be found.
Unless someone has sufficient computer genius to go through a computer, the chances are that unmentioned currency will remain undiscovered currency -- forever---which is an intriguing possibility in itself, given the volatile speed it can rise as well as fall.
The first thing you must do when determining the size of an estate for the purpose of creating a will, is ask your client if they have or intend to invest in the future. At the moment, the chances are you get a decisive no, but don’t be put off. The reason why you should not be put off is that over the next few years this type of currency will become more mainstream and widely known and a decisive no today, can be a maybe tomorrow, and a decisive yes the day after. Therefore, the approach must always be to dispense advice on the basis that a client may be persuaded to invest at some point.
On that basis you must first advise that if they do decide to invest in cryptocurrency, they must set down very clearly in writing where they keep the currency they are holding. This must be specific, to the trading platform or device etc. It must also clearly set out how access to an electronic wallet or online exchange is gained. This means usernames and passwords because without those no one can gain access.
If a client tells you there and then that they have made an investment or are likely to then you may wish to consider the wording of the clause that gifts it in the Will. Obviously, a specific legacy type clause will suffice.
And could be along the following lines:
“To my cousin John Smith I leave all of my cryptocurrency investments in whatever form this takes inclusive of but not necessarily limited to crypto coins and/or tokens together with any other defined form of digital money as is prevalent at the time of my death together with anything found or registered to my crypto currency online exchange platform or electronic wallet”
Following this it would be useful to state the various devices that have been used so as to give the beneficiary the ability to find them.
Words to the effect of:
“The following items which are in my possession at the time of my death may contain a crypto currency asset, wallet or access to an online exchange (here insert the various items which again can gain access to the currency)”
In addition, given the nature of the material which is being handled, it would be prudent to further state that no device or access codes should be given until the true beneficiary has been ascertained and at this point the devices and access information passed to them.
The above is at the time of writing the most practical steps that can be taken when dealing with this type of asset. However, and intriguingly, such is the nature of these type of investments that they are evolving at an incredible speed and also in many cases their value is rising rapidly. Therefore the real question for many private client practitioners will soon be not just to ascertain the value of the currency but try and appraise it for the purpose of inheritance tax and indeed capital gains tax in the administration period. This will be discussed in my next article to follow after events in New York have taken their course!