Safeguarding your secrets
Amelia Beringer and Kieran Forsyth in the private wealth team at Gordon Dadds highlight the importance of detailing your digital assets in your will, to ensure you don’t bury your Bitcoin, amongst other assets.
It has probably seemed quite impossible to avoid the seemingly never ending press which has focused on the surge in demand and value of Bitcoin recently. In amongst the articles was an interesting piece about a man in Colorado, USA who died suddenly, leaving a small fortune arising from his investments in Bitcoin. It raises an interesting question; what happens to these investments, and indeed other digital assets, when someone dies, and how can you ensure that any wealth that may have accumulated is protected and passed on to beneficiaries or your next of kin.
Digital Assets fall within an ever expanding group which includes all content, accounts and electronic files stored online or on devices such as your PC or your smartphone. Such assets might include online bank accounts, online trading accounts such as Paypal, digital artwork or photography, Apple iTunes or online music accounts, points reward schemes such as Nectar or Avios, and now, of course, the increasingly publicised cryptocurrencies such as Bitcoin.
A report produced by PWC in 2013i calculated that the total value of digital assets owned by the population of the UK then amounted to a staggering £25 billion, a figure which has undoubtedly increased in value since then. A strong illustration of such value may well be the digital asset of Bitcoin which in 2017 increased significantly from a starting price in January of £640 and rising to an end of year figure of £14,354 per Bitcoin. What these figures show is that there can be substantial value held in the form of digital assets but which could be unobtainable by those that you leave behind if you fail to take stock and deal with them in your estate planning accordingly.
Let’s look at cryptocurrencies, for instance, and the problems these could cause if you fail to make known the details of your investments in them. The word crypto, stemming from the Latin ‘kruptos’ meaning hidden or secret, is applied in describing this new wave currency due to its cryptographic nature. This secretive nature on the one hand is what attracts some to use Bitcoin as each transaction is anonymous as to the personal identity of whomever is behind it. These purchases or transactions are therefore more discrete than any other form of payment currently available. Of course what this means is that there is no way of telling who owns the Bitcoin and to what extent the size of their holdings may be, unless the person holding them makes this information explicitly known.
Furthermore, in order to facilitate a Bitcoin transaction there needs to be in existence a public key and a private key. Your private key is what you keep either in an online wallet or a hardware wallet and is what allows Bitcoins to be utilised. It may help to take a moment to picture a bank vault which can only be opened with a singular key which is completely unique and incapable of being copied. The only person that can retrieve what is inside that vault is the one who holds the key and therefore the safekeeping of it is of paramount importance to accessing the value within that vault. If you lose the key, you lose the access and potential value of whatever is inside forever.
This is the reason why we find that Bitcoin investors are cautioned by well-known software wallets, such as the commonly used company called Coinbase, to share their private keys with their advisers or family members by writing them down in a secure location or saving the key with a commercial service tasked with managing these access codes. Nevertheless, there is bound to be many an instance in the future where cryptocurrency assets potentially worth thousands or perhaps even millions of pounds are simply rendered inaccessible since the keys to access them have not been made known to relatives who may, when the time comes, benefit substantially from these investments.
If you lose the key, you lose the access and potential value of whatever is inside forever.
Therefore it will become increasingly important to detail these private keys and other details of all the accounts, investments and digital assets including numbers, passwords and usernames with a view to keeping them in a secure place where your executor or beneficiaries may find them. For example, a useful place to make note of them would be to detail them in a document (or electronic file) which would accompany your Will or any Lasting Powers of Attorney that you may have in place, together with instructions to your executors about how to access these assets. You may also wish to include specific bequests of digital assets to individual beneficiaries in your Will.
All being well, this will go some way to avoid the modern day equivalent of Grandad passing away with his valuable stock certificates going undiscovered in his old shoe boxes.
Amelia Beringer, Associate in the Private Wealth team at Gordon Dadds LLP, specialising in Wills, Lasting Powers of Attorney, Trusts and Estate Planning.
T: 020 7518 0248
Kieran Forsyth is a Trainee Solicitor in the Private Wealth team at Gordon Dadds LLP.
T: 020 7759 1678
1PWC. (2013). The Value of a Digital Life.
JM Finn is not able to give individual advice of this nature.