By Isabella Green

Hopefully, when we are pondering the mortality of our beloved friends and family members we are focused on more important things than what we stand to receive. It is certain that one day we will all die and any possessions we maintain will be left to those nearest our hearts. Ideally the process to bequeath and receive these possessions is simple and quick; however, that is often not the case. As there are a wide range of hypothetical obstacles and technicalities, the legal proceedings can take years. When a person is grieving the loss of someone dear to them, the last issue should be settling the deceased estate. When this closure cannot be reached it continues to cause disturbance in the lives of living. The infamous inheritance dispute between Anna Nicole Smith and her late husband’s descendants took 20 years and two trips to the United States Supreme Court. That complicated legal case primarily involved a dispute over who was entitled to certain interest payments. All of this was before the age of cryptocurrencies.  

Cryptocurrencies are not designed to be traced and are held differently from other assets. If the beneficiary does not understand the fickle nature of the asset or the requirements for accessing the crypto, they could be robbed of ownership. Each currency has its own process for transferring ownership, if it has one at all, which becomes more complicated when the original owner has passed and is personally unable to make the transfer. With each currency tackling the issue individually, those that are inheriting from a wide portfolio of accounts will find themselves with even more difficulties. Current solutions for the actual transfer from the deceased to a beneficiary are complicated and require considerable planning before the owner has died, an avenue that is not often thought about when one is considering putting money into cryptocurrencies. The easiest solution is the avenue that most people take when they make a new email password, writing it on a piece of paper and putting it somewhere safe. There are a plethora of problems with this, primarily that anyone who is able to access the cryptocurrency will effectively own it. Additionally, the new rightful owners could be unable to find such credentials or know which currency they now own. 

It is entirely possible that the deceased took no steps to securely pass on their portfolio of which the living have no knowledge. This is not a feature exclusive to cryptocurrencies, which suffer from many of the same issues as other assets. However, these issues are couples with the unique challenges of an emerging asset type. Inheritance tax is also something that must be considered. Depending on how the currencies are kept, what legal jurisdiction you live under, and many other factors the beneficiaries could have to pay tax on the whole estate, including cryptocurrencies. With so many factors to consider it is imperative that people prepare properly.  

When considering whether or not to enter the cryptocurrency market, one factor that should be considered by a conscientious investor. Cryptocurrency is new; however, it has already faced its fair share of complications. The problems with the handling of inheritance are another strike against. With more routine, structured procedures in place more investors could see the stability and long-term viability that is possible. The ease of transferability upon the death of the original owner is not alone on the list of problems with cryptocurrencies. Their newness also results in their instability, making them risky investments. As they are completely digital there is a great risk for hacking and very few legal protections in place. With access to accounts being extremely difficult to keep safe for a next of kin, any method of storing the necessary credentials is vulnerable to attack. More traditional investment options have far greater legal protections surrounding them and even with long legal proceedings, the eventual heir has numerous protections that ensure the proper transfer of ownership.  

Much of the law surrounding crypto is still unwritten. It will take trial and error in this field to create a procedure that allows the easy flow of wealth from one generation to the next. Issues with actually accessing the currency, educating the beneficiary of the necessary steps for recovery, and the legal process are coupled with the already difficult and lengthy inheritance process. The typical procedures only become more complicated as the assets are less grounded in the physical realm. With the traditional inheritance process, one does not have to worry about the compliance of multiple companies or the expert execution of foresight by the deceased. The exciting thing about cryptocurrency for many people is that it is new. The early investors are able to craft the rules and regulations; however, this is a cause for concern for many. As cryptocurrency ages and matures so will its owners, encouraging quick solutions to a foreseeable issue. As it stands now there is no single action that solves the ongoing and growing issue of what should happen to cryptocurrency after the death of its owner. 

The views expressed in this article are the author’s own, and may not reflect the opinions of The St. Andrews Economist.