With the rise in popularity of cryptocurrency and other digital assets like NFTs in the past few years, it has become increasingly important for investors to include their crypto assets in their estate plan. We commissioned an AngusReid survey to find out how Canadians are planning to pass on their digital assets, and the results might surprise you.
44% don’t know what happens to a person’s cryptocurrency when they die
While the cryptocurrency market has grown quickly, it’s relatively new technology that many Canadians don’t fully understand yet. So it may not be entirely surprising that nearly half of Canadians (44%) don’t know what would happen to cryptocurrency holdings when the person who owns them passes away. However, among respondents who said that they do know what would happen, there were a variety of different answers.
10% believe the cryptocurrency is lost forever
10% of Canadians said that when a person passes away, their cryptocurrency holdings are inaccessible and lost forever. Good news: this answer is incorrect. A person’s cryptocurrency isn’t automatically lost in space upon death - this only happens if the password or private key required to access it isn’t shared with a loved one, or if they didn’t hold their crypto in an app/platform like Coinsquare or Coinbase. By including your cryptocurrency in your estate plan (including how it can be accessed), your cryptocurrency will be transferred to a beneficiary.
15% believe that cryptocurrency transfers to a beneficiary named on the account
15% of Canadians believe that if a beneficiary is named on the crypto account, it would transfer to that person. While it’s true that you can name a beneficiary in your will to inherit your crypto, it’s not as easy as naming a beneficiary on your RRSP - the process involves a few more steps (find out below).
22% said that a person’s executor accesses the crypto to transfer to beneficiaries
Only 22% correctly reported that cryptocurrency is not automatically transferred upon death, rather the person’s executor would need to access the crypto. Despite the advanced technology behind cryptocurrency, the method for distributing a person’s cryptocurrency remains old-school.
Your cryptocurrency is an asset that forms part of your estate, just like a house or car. Your executor would transfer your cryptocurrency to the named beneficiary in your will. If you didn’t have a will, a loved one would apply to the court to be appointed as estate administrator, and your cryptocurrency would be distributed to heirs according to provincial intestacy laws. Of course, both scenarios require that the executor is able to access your cryptocurrency, which is why it’s important to be proactive and make an emergency plan for your digital assets.
Here’s how to set up an emergency plan for digital assets
- Create a will to and power of attorney documents to outline who would handle your digital assets
The first piece of your emergency plan should be a will and power of attorney documents. Most crypto exchanges and digital asset platforms require a copy of a will or POA document before they will confirm that your assets exist and allow your executor to access them. Your will sets out who inherits your assets when you pass away, and who should take on key roles like a guardian for minor children and executor for distributing your estate. On the other hand, a power of attorney appoints someone to manage your assets while you’re alive but incapacitated due to illness or injury. These two documents are crucial to avoid having the court make decisions about your digital assets, which can cause delays and added costs for loved ones.
- Create an up-to-date asset list that includes digital assets
An asset list is an important component of an emergency plan that compliments your will and power of attorney documents. Making a complete up-to-date list of assets and storing it with your will prevents any of your digital assets from being forgotten (since there is no central body that your loved ones can ask).
- Make a plan to share passwords and grant access to your accounts
Your cryptocurrency is protected behind either a password to a crypto exchange or a private key. Without your password or key, your loved ones won’t be able to gain access to your cryptocurrency. Yet, not having a method of sharing passwords with a trusted friend or family member seems to be a common occurrence. We recently surveyed Willful customers to find out more about how Canadians are planning to pass on their digital assets and 50% of respondents don’t have someone in their life who knows all of their passwords - most people just hadn’t thought about it (74%).
Having a password manager like 1Password to record important information for accessing your digital assets and sharing it with your executor is an easy way to ensure your emergency plan can come together if necessary.
The bottom line
Only 11% of Willful customers who responded to our survey reported having an emergency plan for their digital assets. 39% said they had never thought about it. Now that you know how important it is to plan for your digital assets, you’ve already taken the first step. It only takes a few more to make a full emergency plan and gain peace of mind knowing your digital assets won’t be left out of the picture.
The AngusReid national survey of 1,511 Canadians was commissioned June 16, 2021.