Home >Markets >Cryptocurrency >Things to note when creating an estate plan for crypto holdings

Family members in general are rarely kept fully abreast of a person’s assets, but this issue is particularly acute for some kinds of assets that cannot be easily traced. One such asset that has come into prominence over the past few years is cryptocurrency.

According to industry estimates, around 15 million people in India are already actively investing in digital currencies such as bitcoin, ether and dogecoin. One of the easiest ways to ensure that your family has access to your holdings is the nominee option on crypto exchanges.

ZebPay offers this facility via mail, wherein a customer can share details such as the nominee’s name, mobile number, address and PAN number, among others. After the demise of the customer, the fiat and crypto funds get transferred to the nominee’s account. However, not all crypto exchanges in India offer this facility as of now, and investors have been urging them to include this option.

“Even though we don’t have a nominee feature as yet, our support team is equipped to handle such cases effectively. We have already handled such issues in the past. In such cases, we help the deceased person’s next of kin to get custody of their assets," said Nischal Shetty, CEO and founder, WazirX, which plans to bring in the nominee feature soon on its platform.

Another crypto exchange, BuyUcoin, is also working on a nominee as well as a nudge option.

“Once this feature is live, users who have not appointed any nominee will be prompted to do so every time they log in," said Shivam Thakral, CEO, BuyUcoin. In the meantime, a family member of the deceased can raise a request with the exchange.

Just like other asset classes such as bank accounts, a nominee is the person who has the custody of the assets and safeguards them in the interim. However, as per experts, the actual legal title to the asset (in this case crypto) will belong to the person named in a Will, or as decided by intestacy law, depending on the religion.

Therefore, anyone using the option of a nominee should also ideally ensure that the Will defines the exact same person as the legal heir for the crypto assets.

“A Will helps in properly accounting for digital assets and instructions to access them for family members. If you don’t write a Will, everything you own will be shared out in a standard way, as defined by the law, which may not always be the way you want it to be," said Nitin Rao, CEO, InCred Wealth.

A Will for crypto assets

As cryptocurrencies are not traditional assets such as shares or bank accounts, the laws around the management of such assets are still at a very nascent stage in India.

“Since the Supreme Court quashed the 2018 RBI circular, it appears that cryptocurrency occupies a ‘grey’ area. Until the government decides otherwise, crypto holdings shall be considered as legal assets in India and accordingly, such assets can be included in the last Will and testament of a testator," said Rishabh Shroff, partner, Cyril Amarchand Mangaldas. A testator is a person who has written a Will.

Points to ponder

Given that cryptocurrencies are similar to any other property, they can be owned, gifted and inherited by an individual.

Since the laws around cryptocurrencies in India are still unclear, an individual must list down all cryptocurrencies owned by him or her in the Will along with details of the digital wallets through which such investments have been made.

“As cryptocurrencies are saved on the blockchain technology, the testator could also execute a memorandum to the Will with details of the passwords to such digital wallets and a copy of the same may be made available to the executor of the Will. This would help ensure that the passwords and personal identification details are not made public in the event of a dispute to a Will," said Shroff.

Many individuals hold cryptocurrencies through physical hardware, which functions like a master key to your crypto wallets. If these hardware wallets get misplaced or stolen, then the cryptocurrency is lost forever. Therefore, the physical custody and legal ownership of this hardware wallet is important and should be dealt with carefully in a Will.

Legal standing

Experts await further clarifications and details from the Reserve Bank of India, the Union government and courts on the final word on the legal status of cryptocurrencies.

The Union government is planning to introduce a crypto bill, which may provide clarity on the status of cryptocurrencies.

Indian investors may also have crypto assets outside India. This, in turn, presents a layer of cross-border planning to be carried out, including exposure to offshore taxes and disclosure requirements.

While writing a Will is easy, getting expert professional help is important so that the document is not open to interpretation and all the Indian regulations and laws are followed with respect to virtual currencies.


Private keys and public keys

A cryptocurrency is digitally encrypted and decentralized, which is not linked to or regulated by any government or a central bank. While a fiat currency can be represented by coins and notes, a cryptocurrency is represented by private and public pieces of alphanumeric strings. These are called public and private keys.

These assume significance when you store cryptocurrency in an offline wallet like a hardware wallet or paper wallet. If you hold cryptocurrency with an exchange, the private key is shared with the exchange. This reduces the risk of losing the cryptocurrency due to the loss of the private key, but exposes you more to the risk of hacking.

A private key is a large and random number. It works as a password and determines the ownership of the asset. Usually, crypto wallets generate a private key for users. Owning a crypto essentially means having a private key. A public key is an address that everyone can see and is used by other people to send crypto assets to you.

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