Bit­coin has crashed but could still give you a huge IHT bill

The Daily Telegraph - Your Money - - MONEY - The to­tal value of all cryp­tocur­rency on the mar­ket

In­her­it­ing volatile cryp­tocur­ren­cies can be a mine­field, says Harry Brennan

If you in­her­ited a cryp­tocur­rency such as Bit­coin, Car­dano or Ethereum, would you have the faintest idea what to do with it? More and more peo­ple are owners of dig­i­tal as­sets, but few have given thought to how they will be passed from one gen­er­a­tion to the next.

Dig­i­tal cur­ren­cies in par­tic­u­lar can be a huge source of stress for be­reaved fam­i­lies sort­ing out a rel­a­tive’s af­fairs.

Firstly, they can be in­cred­i­bly volatile. In Jan­uary 2017, the Bit­coin craze be­gan as in­ter­est in cryp­tocur­ren­cies soared. At that time one Bit­coin was worth about £740, be­fore rock­et­ing to al­most £15,000 a year later. Its price has since plum­meted to less than £3,000.

Vir­tu­ally none of the new cur­ren­cies was able to es­cape the burst­ing of the cryp­to­bub­ble, with pop­u­lar al­ter­na­tive Car­dano fall­ing by 97pc since its 2017 high. An­other, Ethereum, has lost 87pc of its value since sum­mer 2017. The en­tire cryp­tocur­rency mar­ket as a whole has lost 86pc of its value. It grew from about €18bn (£14.2bn) in Jan­uary 2017 to roughly $800bn just a year later, only to fall al­most as quickly to just un­der $109bn, where it now stands.

When some­one dies you have to add up all their as­sets and pay any in­her­i­tance tax due be­fore you can dis­trib­ute the es­tate. If an as­set such as a cryp­tocur­rency then dra­mat­i­cally falls in value, as it has done this year, not only will you see the value of your wind­fall di­min­ish but you would have paid tax on lost money.

Se­condly, dig­i­tal cur­ren­cies can be dif­fi­cult to sell, and some have to turn to spe­cial­ist bro­kers.

David Thomas of Global Block, a crypto bro­ker, re­cently helped a fam­ily to sell a large port­fo­lio of 27 dif­fer­ent cryp­tocur­ren­cies worth more than £3m held in a num­ber of “wal­lets” – on­line ac­counts where dig­i­tal as­sets are stored.

“While you can fill in a form with a stock­bro­ker to sell your in­vest­ments, it’s not so easy with crypto,” Mr Thomas said. “If you have in­her­ited a load of cur­ren­cies you have never heard of, you don’t know what the best ex­change is to sell it on and you don’t know what the best price to sell at is. With some­thing so volatile it can mean a dif­fer­ence of thou­sands of pounds.”

Gain­ing ac­cess to these as­sets is an­other po­ten­tial headache, he added.

Banks and other fi­nan­cial in­sti­tu­tions will re­lease as­sets once you have no­ti­fied them of a death and pro­vided the rel­e­vant le­gal doc­u­ments. With cryp­tocur­ren­cies, how­ever, if you do not have the spe­cific pass­word rel­e­vant to the wal­let where the cur­rency is held, that money is lost.

“Every­one has been con­cerned with the Bit­coin craze but has given lit­tle thought to what comes after­wards,” Mr Thomas said.

“Dig­i­tal as­sets are grow­ing and we need to think about how they will be passed on so they are not lost for­ever and so fam­i­lies don’t miss out.”

Ian Bond of law firm Tal­bots said sim­i­lar is­sues ap­plied to more tra­di­tional as­sets held in on­line-only ac­counts. “If all your

‘Every­one has been con­cerned with the Bit­coin craze, but not what comes af­ter it’

cor­re­spon­dence is pa­per­less and your fam­ily doesn’t have ac­cess to your emails, there is no way they are go­ing to know that money is there,” he said.

In other cases valu­able as­sets can spring up un­ex­pect­edly, or can be lost al­to­gether.

“Peo­ple sim­ply for­get to in­form their rel­a­tives. I have dealt with es­tates where un­fin­ished manuscripts have later been found on com­put­ers and sud­denly heirs be­come the owners of valu­able in­tel­lec­tual prop­erty,” Mr Bond added.

He added that peo­ple should make a com­pre­hen­sive list of all the as­sets they own, es­pe­cially those that could be at risk of be­ing over­looked, and in­clude it in their will.

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