There’s one thing we’re leaving out of the picture when it comes to the wildly popular cryptocurrency – and not doing it could lead to a huge financial fail.
Bitcoin has got people talking as the cryptocurrency managed to smash through the $US50,000 ($A64,000) price barrier by mid-January.
On Wednesday, Bitcoin settled at $US48,500 ($A63,000) and has an estimated market value of $US916 billion ($A1.1 trillion).
But there’s a less common thought investors are probably putting on the backburner and it has got nothing to do with whether to hold or sell the digital coins.
It’s about what to do with cryptocurrency in your will.
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Andrew Meiliunas, an Australian lawyer at Maurice Blackburn Lawyers, told news.com.au that it’s important to address what you’re going to do with all your assets including cryptocurrency to avoid serious issues such as beneficiaries not being able to access what you’ve left them.
He said the most important consideration when leaving Bitcoin or another cryptocurrency to someone in your will is to not put your digital wallet password on your will as there’s a risk you’ll be making it public knowledge.
“When it comes to crypto and wills, the highest point we want to stress is to not include passwords in the will,” Mr Meiliunas explained.
“The biggest thing to avoid is putting the passwords and account numbers within the will because it could become a public document and other people will see it,” he said.
“People think, well you need the password to access the account, but wills can become public. The worst thing is for other people to find the password,” he added.
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While you want to ensure your password it private, it’s important that whoever you’re leaving your assets to knows exactly how to access them.
“You don’t want people to know your password but you need people to know if you have crypto – it’s OK to mention that in your will. It’s good to specify that you’ve got those assets and are you leaving them to someone,” he said.
Mr Meiliunas reiterated that the worst thing would be to leave no paper trail at all because cryptocurrency is unlike traditional assets such as shares or bank accounts where there is an obvious paper trail.
“If people don’t know that you hold cryptocurrency, they won’t know to look for it,” he said.
Since cryptocurrency is still so new, he added that some people go to lengths to include a step-by-step guide of how to access the digital coins that goes beyond leaving a password, as there’s a chance the executor won’t be familiar with how to access the asset.
“They need to know where to find info about your crypto assets, where to look and how to access it,” Mr Meiliunas said.
There was a situation last year when a Canadian cryptocurrency CEO died without leaving the password to his digital tokens, including Bitcoin, Litecoin and Ether. The coins were worth around $A200 million but the accounts were unable to be accessed from the company’s digital wallets.
Mr Meiliunas recounted other situations where assets weren’t able to be accessed because of lost laptops or facial recognition needed to unlock passwords.
He said it’s important that your will executor knows where to find the information about the crypto assets and how to get them.
“Crypto is still relatively new – we haven’t seen all the issues that can come up and what can go wrong – but if no one knows to go looking for it, it would sit there, I would assume, indefinitely,” he explained.
“Depending on what you want to happen to your crypto, if you want a specific person to receive it, you need to specifically mention that in your will,” Mr Meiliunas said. “If you didn’t do that it will fall into the residue of your estate to be divided.”
When putting your will together, Mr Meiliunas added that it’s important to seek advice, especially if you are unsure.
“As cryptocurrency is still in its infancy and people haven’t had to deal with this enough, be it lawyers and accountants, I would encourage people to get specialised, professional advice,” he said.
It could also be an idea to ask your lawyer about secure options for storing and accessing the crypto wallet that holds your private key.