Cryptocurrency: do you own it and do you know what will happen to it when you die?

Adele Anthony

Adele Anthony

Principal Lawyer at Your Legacy Lawyer

Cryptocurrency is definitely a buzz word in current times, but do you know what will happen to your cryptocurrency if you die?

Don’t be like the CEO of US-based digital-asset exchange, Quadriga CX, 30-year-old, Gerald Cotten, who died leaving the company with a $275 million coin and cash access problem with no clear solution.

The company have been unable to access its “digital wallets” (an app storing the keys used to send and receive cryptocurrencies). Big problem, you bet!

It appears Mr Cotten was very security conscious and encrypted everything: his laptop, email addresses and messaging system. He also took sole responsibility for handling the company’s funds and coins and in an attempt to avoid being hacked, he moved most of the company’s digital coins into cold storage (offline environment). Unfortunately, for the company, no one including Mr Cotten’s widow has been able to find his passwords and despite the company bringing in experts to hack Mr Cotten’s computers and try to circumvent an encrypted USB key, the company’s cryptocurrency holdings have become inaccessible.

For those who don’t know, what exactly is cryptocurrency?

Cryptocurrency is a non-physical digital currency that only exists online so there are no traditional notes or coins. Security is a major issue for cryptocurrency (and other digital currencies) and therefore to prevent unauthorised access and use, they are encrypted, as in Mr Cotten’s case.

Some of the key aspects of cryptocurrency include:

  • Instead of a banking institution controlling the funds, they are instead controlled by codes
  • Unlike with traditional currency, users can store money and make payments using encrypted codes rather than using their names
  • Blockchain, a ledger which records all transactions, supports cryptocurrency and other digital currency
  • Individuals must provide an electronic signature to evidence their cryptocurrency transactions


You might have heard of ‘Bitcoin’. Bitcoin is the most well-known and probably the largest of the cryptocurrency providers, worth more than $45 billion. Globally there are now nearly 1000 different types of cryptocurrencies.

Users of cryptocurrency store and spend their money using encrypted ‘digital’ or ‘virtual’ wallets which require passwords to access them.

Cryptocurrency and deceased estates

Lawyers are starting to see cryptocurrency being noted as an asset in estate planning and listed as an asset in deceased estates.

Users are increasingly leaving their digital assets such as cryptocurrency to their loved ones in their Wills. What does that mean for their executors? Executors of deceased estates are tasked with locating a deceased person’s assets and determining how to distribute them to the deceased’s chosen beneficiaries. It becomes a huge and sometimes insurmountable issue if the executor does not know about the deceased person’s cryptocurrency nor have access to their digital or virtual wallets and the encrypted codes and electronic signatures. If the executor does know about the cryptocurrency but does not have access to the digital or virtual wallets and the encrypted codes and electronic signatures, this makes obtaining a grant of probate extremely difficult and can cause significant delay to not only distributing the cryptocurrency holdings to the deceased’s beneficiaries but also distributing the other non-digital assets of the deceased to their beneficiaries.

I own cryptocurrency. What do I need to do?

If you hold cryptocurrency or another form of digital asset, you should seriously consider having a sound estate plan prepared to ensure that when you die:

  • These digital assets can be distributed to your chosen beneficiaries; and
  • Any delays in administering your estate are mitigated.


You need to ensure that your appointed executor knows that you own cryptocurrency and knows exactly where to find information about accessing your digital or virtual wallets after your death. It’s therefore critical that you not only store information on accessing and using these assets but let your executor know where you have stored this information. It isn’t a good idea to put this type of information in your Will as it will eventually (if probate is sought) become a public document.

One of the best ways to make sure your cryptocurrency holdings pass to your chosen beneficiaries after you die is to prepare a Letter of Wishes which you can keep with your Will either noting your passwords, pins, and other necessary codes to access your cryptocurrency or noting where this information is stored and how to access it. You can update your Letter of Wishes as things change. Your Legacy Lawyer provides a Letter of Wishes in Word format to all its clients.

At a minimum, a Letter of Wishes should include:

  • A step-by-step guide to accessing your cryptocurrency holdings
  • The type of digital or virtual wallet you hold
  • Details as to how to access any computer, mobile phone or device where you have stored your cryptocurrency information
  • The login and password details for each of your digital or virtual wallets, accounts and/or websites and password managers
  • Step-by-step guides as to how to access your wallet(s) and how to exchange the cryptocurrency for traditional currency should your executor or beneficiaries decide to do this


It is vital that if you invest in cryptocurrency or other forms of digital currency, you think about what you want to happen to it after your death. If you die without letting someone know how to access and use your cryptocurrency, there’s a real risk that your crypto funds will be lost and unable to be distributed to your beneficiaries. Not an ideal situation.

So, let your executor and/or your loved ones know that you have invested in cryptocurrency and let them know exactly how to access and use it, so that they are able to do so after you die.

If you would like more information about how to make sure your cryptocurrency holdings are included in your estate plan and distributed to your beneficiaries after you die, please contact us at

Cryptocurrency and the tax man

There’s a saying that you ‘can’t get around the tax man’ and that is absolutely true when it comes to cryptocurrency. The Australian Taxation Office (ATO) have become concerned that taxpayers believe capital gains made from their cryptocurrency holdings are tax-free or only taxable if the holdings are cashed into Australian $.

According to the ATO, if cryptocurrency users make capital gains or losses from their cryptocurrency, they are required to report them in their annual tax returns.

Assistant Commissioner of Taxation, Tim Loh said: “This year we will be writing to around 100,000 taxpayers with cryptocurrency assets explaining their tax obligations and urging them to review their previously lodged returns. We also expect to prompt almost 300,000 taxpayers as they lodge their 2021 tax return to report their cryptocurrency capital gains or losses”.

Mr Loh went on to say: “We are alarmed that some taxpayers think the anonymity of cryptocurrencies provides a licence to ignore their tax obligations”.

In essence, those who buy, sell, swap for fiat currency (a government-issued currency not backed by a commodity such as gold), or exchange one form cryptocurrency for another, will be liable for Capital Gains Tax. Capital Gains Tax also applies to the disposal of non-fungible tokens (tokens used to represent ownership of unique items such as art and collectables).

Businesses (including sole traders) paid in cryptocurrency or other digital assets for goods and services will have these payments included as income in their tax returns (to the value of the cryptocurrency in AU$).

While it might seem that cryptocurrency is operating in an anonymous digital sphere, be assured that the ATO are actively monitoring cryptocurrency transactions. Mr Loh said: “The best tip to nail your cryptocurrency gains and losses is to keep accurate records including dates of transactions, the value in Australian dollars at the time of the transactions, what the transactions were for, and who the other party was, even if it’s just their wallet address”.

If you want to find out more about the taxation of cryptocurrency holdings, please hit the link below.—specifically-bitcoin/

Australian Government, Australian Taxation Office, ‘Cryptocurrency under the microscope this tax time’, 28 May 2021, viewed on 15 September 2021 at <>