What happens to your crypto in divorce or death?
Stephan Haynes
The South African Revenue Service only in April 2018 released a statement noting its interpretation of cryptocurrency as an “asset of intangible nature” to be treated as gross income or alternatively as capital for income tax purposes.
Many common legal aspects of crypto assets are unclear. The main concern is that as crypto is decentralised, there is no-one regulating the transactions, and thus too much opportunity for fraud. By regulating cryptocurrencies, we may secure them as assets, but that could take away from the anonymity people so desire.
Following the uncertainties involving future tax consequences and regulation, the crypto owner’s biggest question should be: “What happens to my crypto assets in death and divorce?”
Considerations in death
The general principles of the law of succession apply to cryptocurrency. However, cryptocurrency is held in a “wallet” accessible by a password known only to the owner. So it is critical to include information to access your crypto wallet in your will.
Cryptocurrency in divorce
Cryptocurrency is applicable to the general principles of matrimonial law. The difficulty is in determining the value of a spouse’s estate when it owns crypto assets. It is important to review financial statements to ascertain if there are crypto accounts.
Another consideration is the uncertainty surrounding its value for tax and distribution. As such, a spouse’s estate may be wiped out or grow into a fortune. Consequently, capital gains and income tax need to be borne in mind.
Stephan Haynes is an attorney with Gillan and Veldhuizen