Introduction
With the rise of cryptocurrency, ensuring these digital assets are part of your estate plan is crucial to safeguard their transfer and distribution upon your passing. Although cryptocurrency is viewed as property under South African succession law, no specific regulation or case law yet addresses its inheritance.
The Law, Your Will, and Appointment of a Trusted Person
South Africa currently has no explicit regulations on crypto inheritance, but crypto is treated as property, which places it under general succession laws. To avoid potential complications, inform a trusted individual of your crypto holdings and access methods. Clearly stating your intentions for your crypto assets in your will or other legal documents will ensure they are managed according to your wishes, rather than under default succession practices.
Designate a Digital Asset Executor
When it comes to handling crypto, consider appointing a digital asset executor. This individual should be familiar with cryptocurrency and capable of managing digital assets according to your specified wishes. Your digital asset executor may not be the same person as your estate’s overall executor, and it’s not uncommon to have multiple executors when specialized knowledge is required. This can help ensure that the transfer of your crypto assets is handled correctly and that heirs receive these assets securely.
Security and Identification
Crypto ownership and transfer require secure access to private keys, as loss of a key results in permanent loss of access to the assets. Setting up a secure wallet is essential; private keys should be safely stored, ideally in a hardware wallet or other secure location, and never shared. Make sure your executor or a trusted person knows where and how to access these keys. This is especially critical for crypto, as there is no way to retrieve funds without the key.
Updating Estate Plans
Crypto assets can change in value rapidly, and regulatory changes are common in this evolving space. Regularly updating your estate plan ensures it reflects any changes in your crypto holdings and adapts to life events. A memorandum accompanying your will can facilitate updates without the need to change the will itself, allowing for easier adjustments to reflect shifts in your portfolio, new technologies, or legal developments.
Valuation of Crypto
Determining the fair market value of cryptocurrency is essential upon the owner’s death, as crypto is subject to price volatility. Here are several recommended methods to value crypto accurately:
- Professional Valuation – A qualified appraiser or tax expert with cryptocurrency experience can determine fair market value, considering factors like trading volume and exchange rates.
- Market Data – Review trading prices on reputable exchanges to establish a fair value based on the date of death.
- Specialized Platforms – Certain professional crypto services offer valuation tools and historical data to aid in determining the value of assets.
Regardless of the valuation method used, executors should document the methodology and retain supporting documents such as exchange statements. This is particularly important if estate duty applies, which may be the case if crypto is not left exclusively to a surviving spouse.
Practical Considerations
Unlike traditional assets, crypto lacks a paper trail, making it essential to create a comprehensive inventory. Document each type of cryptocurrency, its amount, and relevant account details in a secure location, such as a memorandum tied to your will. This memorandum enables updates to your crypto holdings without altering your will. Additionally, ensure heirs understand your crypto estate and its value to fully benefit from their inheritance.
Additional Considerations
- Familiarize Yourself with Crypto – A solid understanding of crypto helps ensure you manage and secure these assets effectively.
- Secure Your Holdings – Use secure wallets and avoid sharing private keys unnecessarily.
- Decide on the Future of Your Crypto – Clarify how you wish these assets to be managed, transferred, or sold in your absence.
- Seek Professional Advice – Given the complexities and rapid regulatory changes in crypto, professional advice can ensure compliance with tax and succession laws.
Regular Review and Updates
In addition to monitoring changes in your personal life, keep an eye on new technologies and regulations in the crypto space. A flexible, living estate plan ensures that your crypto assets will be distributed in line with your intentions while complying with current laws.