While cryptocurrency has decreased in value since its 2017 peak, it still represents a significant chunk of wealth for many Canadian adults. In spite of this, estate planning for cryptocurrency is often neglected. This frequently results in the funds being lost in difficult estate litigation with limited precedent. For this reason, estate planning is highly critical for Ontario cryptocurrency owners.
Limited understanding and accessibility
The biggest risk for owners of this asset is for it to simply be inaccessible and essentially “gone” when they pass away. This is a particular risk when the beneficiaries of an estate do not understand cryptocurrency fully, dismiss its value or lack the expertise to access it fully. One of the main reasons for this is the high security level of cryptocurrency. Although beneficial for the buyer initially, the high security can make it very difficult for unprepared beneficiaries to access the assets.
In short, a private key or seed phrase is required to access cryptocurrency. It is imperative that owners of such an asset share this information responsibly, so that the beneficiary – and no one else – can access the funds. Inheriting cryptocurrency is similar to inheriting cash, in that is it untraceable.
Cryptocurrency also carries risks due to fluctuating values, so it can be challenging when it comes to issues like estate taxes. Being very specific in your wording when including it in a trust is key to successful succession. A lawyer can help you with this.
The volatile nature of the value of cryptocurrency can be a challenge in estate administration. So, too, can the challenges in accessing it due to high security standards. If you have cryptocurrency – or other unique assets – to include in your will or trust, it can be worthwhile to speak to an experienced estate planning lawyer about best to handle it.