If tax is payable from the residue of the estate, the tax bill could in theory be so substantial that it requires all other assets to be sold to meet the tax, including perhaps the family home.
Including a reference in a will could also lead to wasted time and costs in searching for the assets after death, only to find they had perhaps been long since liquidated or the keys lost. Executors could incur high costs and delays attempting to locate old hard drives looking for details of holdings.
Accessing crypto after death
It is suggested by many digital asset wallet providers that steps should be taken to ensure that private keys are not lost. Writing the keys down on a piece of paper, or placing part of the key with your estate planning lawyer have all been suggestions.
The potential for tax to be avoided by transferring private keys to heirs without disclosure is a risk, but is perhaps no different to issues around artwork or cash.
Ultimately the law has to rely upon the deceased and the executors to comply with their duties and ensure a clear inventory of assets is presented as accurately as possible.
In the UK, as in many other countries, governments have come to recognise these inherent issues, and a consultation is open on measures to ensure robust, transparent and fair standards across the cryptocurrency industry.
While proposals have yet to be made, any steps to stabilise the industry are likely to have a net positive effect for those wishing to include crypto assets in their estate.
As change continues apace for the crypto landscape, time will tell whether the law is able to keep pace as more and more digital assets find their way into estates.
But what if the event is not death, but divorce?
Given the intractability of cryptocurrency, there is much interest as to how the asset would, or could, be divided following a divorce.
It is important to remember that the family court will take into account all assets of the parties, whatever form they may take. In this way, cryptocurrency is treated no differently to cash or property and the court may make orders for such assets to be transferred or sold and the proceeds divided between the parties accordingly.
The only way in which cryptocurrency can be protected in the event of a divorce is via a prenuptial agreement, but even these are not immune to the wide-ranging powers of the family courts in England and Wales and the overarching power to ensure financial awards are "fair".
