Cryptocurrency and Will disputes: navigating the new frontier of estate planning

When a loved one passes away, grief is often accompanied by logistical challenges. But in today’s digital age, what if those challenges include a digital scavenger hunt for hidden cryptocurrency?

With crypto adoption on the rise in Australia, more families are facing this unexpected and often frustrating legal reality. Traditional estate laws haven’t yet caught up with the complexities of digital assets, leaving gaps that can lead to legal disputes and significant financial loss.

What makes Cryptocurrency different in estate planning?

Unlike traditional assets such as real estate, shares, or bank accounts, cryptocurrency comes with technical and jurisdictional hurdles that often sit at the heart of inheritance disputes:

• Technical complexity: crypto assets are secured by private keys. If these keys are lost, they are virtually impossible to recover, potentially leaving executors locked out permanently.
• Jurisdictional issues: assets may be held on international exchanges or in private wallets, complicating questions of legal jurisdiction and applicable laws.
• Privacy: the pseudonymous nature of crypto can make assets difficult to identify and track, increasing the risk of hidden holdings and family disputes.

Common cryptocurrency Will disputes emerging in Australia

Australian courts are starting to see new dispute patterns involving digital assets:

• The lost key problem: beneficiaries know the deceased held crypto, but without the private key or wallet password, the assets can’t be recovered.
• Hidden assets: families suspect undisclosed crypto holdings but can’t find evidence, often leading to accusations of misappropriation.
• Exchange vs. private wallet access: recovery processes differ significantly between centralised exchanges and private wallets. Executors need to understand these distinctions to navigate both legal and technical hurdles

Immediate steps to take if a loved one may have held cryptocurrency

If you believe the deceased held crypto assets:

• Secure all devices: lock down computers, phones, and storage devices; these may contain private keys or login credentials.
• Look for records: search for physical or digital notes, password manager entries, or safe deposit boxes that may contain access information.
• Contact exchanges: if there’s evidence of an exchange account, reach out immediately. Many have procedures for deceased estates and can assist in asset recovery.

Planning ahead: avoiding cryptocurrency estate disputes

The most effective way to prevent disputes is through proactive planning:

• Use a digital asset management (DAM) service: these services securely manage and transfer digital assets after death.
• Create a secure key storage system: store private keys and passwords in a secure, accessible location. Ensure your executor knows how to access them.
• Communicate with beneficiaries: you don’t need to share your keys, but letting loved ones know you hold crypto, and have a plan, can prevent future disputes.

The future of cryptocurrency estate planning

As cryptocurrency becomes mainstream, legal frameworks and technologies will continue to evolve. However, the complexity of these assets means early legal advice is critical, whether you’re writing your Will or handling a loved one’s estate.

Our expert Will dispute lawyers are here to help. We have expertise in both traditional and digital asset law and can help safeguard your family’s future and protect valuable assets. Contact us today.