Estate Planning for Blockchain Assets: Navigating Cryptocurrencies and NFTs

Introduction

For many, the assets that will form one’s estate are straightforward to understand, be it a home or cash. While these assets generally comprise the bulk of many estate plans, increased investment in blockchain assets like cryptocurrencies or NFTs (“Blockchain Assets”) presents unique estate planning legal issues.

REGULATORY GAP

The Wills, Estates and Succession Act, SBC 2009, c. 13 does not specifically account for Blockchain Assets. British Columbian courts have consistently identified Blockchain Assets as digital assets.[1] Beyond these decisions, Canadian courts have given little guidance; instead, favouring a flexible approach in an appeal to pragmatism. The prevalence of Blockchain Assets in the broader Canadian financial system suggests that further clarification will come through case law or statute.

The gap in regulatory oversight leaves Owners, their personal representatives, and beneficiaries at the whim of (1) opaque processes used by exchanges and digital wallet providers, or (2) rudimentary storage methods used by owners to access their cryptocurrency. Exchanges do not allow account holders to designate beneficiaries, and the requirements vary greatly. For example, Coinbase requires submission of the cryptocurrency owner’s will and death certificate, while Binance and Kraken evaluate each circumstance on a case-by-case basis.

CHOOSING A CRYPTO-EXECUTOR

Owners should choose their executors with particular care. Beyond being a responsible and trustworthy individual, executors for Owners should have sufficient fluency with Blockchain Assets to navigate the challenging process of accessing the deceased owner’s wallet. Owners should consider telling their executor about which Blockchain Assets they own and how the executor can access those assets, or – if uncomfortable with disclosing this information – leave detailed instructions on accessing the assets upon their death.

Alternatively, Owners can gift their Blockchain Assets during their lifetime, which can minimize the risk of:

• an executor being unable to access the Blockchain Assets;
• delays in distributing the deceased Owner’s Blockchain Assets; and
• needing to pay probate fees.

To assist any executor tasked with administering Blockchain Assets, Owners should ensure they keep records of transactions, including the:

• transaction date;
• cryptocurrency or NFT value at the time of the transaction;
• digital wallet records and Blockchain Asset addresses; and
• description of the transaction.

A comprehensive estate plan can help Owners pass their Blockchain Assets to their desired recipients. We welcome you to contact one of our estate planning lawyers for more information and advice at estates@bellalliance.ca or by phone at 604.873.8723.

**Bell Alliance LLP does not advise on taxes and any reference to taxes such as capital gains, business income, or GST and PST should not be interpreted as legal advice or tax advice.  Any reference to tax in this article should be a prompt for the reader to obtain tax advice from their tax accountant.

[1] Shair.com Global Digital Services Ltd v Arnold, 2018 BCSC 1512; M.W. v N.L.M.W., 2021 BCSC 1273