Digitalization has an impact on inheritance. Whereas in the past, an estate encompassed bank assets and securities, nowadays it may also consist of crypto assets such as Bitcoin or Ether. How and to whom are crypto assets bequeathed? How can the heirs' access to the crypto assets be ensured? What happens to crypto assets in case of loss of capacity of judgement?
Q: Will crypto assets be passed on to heirs?
A: Yes. Swiss inheritance law follows the principle of universal succession (Art. 560 of Swiss Civil Code). This means that heirs inherit the estate as a whole and assume the testator’s legal position upon his death. Subject to the universal succession are the testator's heritable (in)corporeal assets and liabilities (e.g. real estate, claims etc.). That means in our view that, crypto assets are also bequeathed.
Q: Who receives the cryptocurrencies?
A: If a spouse domiciled in Switzerland dies without having made a choice of law in a marriage contract, the division of matrimonial property first takes place and serves to determine the assets belonging to the deceased and surviving spouse. The deceased spouse’s assets are then further divided in accordance with the estate.
If the testator domiciled in Switzerland has not made a choice of law in favour of his home country law, Swiss inheritance law applies. The bereaved family inherits in accordance with a statutory order. In the first place, the surviving spouse and the testator’s direct descendants inherit the estate. In the absence of a spouse and descendants, the parents and/or their descendants inherit the estate.
A testator may deviate from that statuary order in a testamentary disposition (last will or inheritance contract). However, certain individuals are entitled to a compulsory share of the estate (minimum share). The surviving spouse must receive at least ½ of his statutory entitlement. The descendants’ compulsory share is ¾ of their statutory entitlement. In the absence of any descendants, the parents have a compulsory share of ½ of their statutory entitlement. However, with the revision of the inheritance law (expected to come into force in 2022), the descendants' compulsory entitlement will be reduced to ½ of their statutory portion of the estate and the parents' compulsory share will be removed.
Q: How are the crypto assets valued?
A: For the division the estate, the value of the cryptocurrencies must be determined. Bearing in mind that they can be subject to considerable fluctuations in value between the date of death and the date of division of the estate, the heirs must agree on the valuation date. If no agreement is reached, the crypto assets must be valued at the market value at the time of division.
The market value on the date of the testator’s death also applies to the calculation of the compulsory share of the estate.
Crypto assets have no authoritative or definitive market value due to the decentralized trading system. In the event of a dispute, we deem it reasonable to use the market value determined by the Federal Tax Administration (average of various trading platforms). If the Federal Tax Administration has not determined a price for the respective crypto currency, the market value is calculated based on the year-end price of the respective trading platform where the assets are custodied, if applicable.
Q: Which heir receives the crypto assets?
A: The testator is free to allocate crypto assets to a specific heir or give an heir the choice to take over the crypto assets by crediting them to his inheritance share.
If the testator wishes to benefit a person with crypto assets without granting him the status of an heir, he may bequeath him the crypto assets in form of a legacy.
Q: How can the access to the crypto assets be ensured?
A: It is relevant whether the testator manages the crypto assets on his own by means of a "non-custodial wallet" with direct access or he has them managed in a "custodial wallet" by a third party (e.g. Sygnum, Bitcoin Suisse, or Coinbase).
If the crypto assets are held in a "custodial wallet", where a third party exercises a power of disposal over the assets or safeguards the associated private keys, such contractual relationship will be in general transferred automatically to the heirs. If the testator ensures that the name of the third party is mentioned in a document that can be located (e.g. tax return or a safely stored testamentary disposition) and becomes known to the heirs, the heirs' access to the crypto assets is foreseen.
However, if the cryptocurrencies are held in a non-custodial private wallet, where only the testator has knowledge of the private key, the heirs can only access them if they know the public keys (PUK) and associated private keys (PIK) or the corresponding "seed" (password consisting of 12 to 24 words; so-called "master private key" or "seed key"). To ensure that access to crypto assets is not lost upon death, it is important that the testator states in a last will which crypto currencies exist ("crypto assets inventory"), how they are managed and how they can be accessed.
However, if the testator prefers to keep the Key Pair or seed secret, or if the heir is not familiar with cryptocurrencies, the testator may authorize a trusted third person experienced in this field to support the heir in accessing the crypto assets ("helper"). Alternatively, the testator may appoint one (or more) executor(s) that is familiar with cryptocurrencies in his last will. The executor has exclusive power of disposal of the crypto assets for the duration of his mandate and can execute the digital will of the testator.
Q: Who has access to the crypto assets in case of loss of capacity of judgement?
A: In the event of loss of capacity of judgement resulting from illness or accident, the law provides that the Swiss Adult Protection Authority appoints a representative to deal with the personal and financial affairs of the individual lacking capacity of judgement. The representative may be any third individual who is not familiar with crypto assets. Consequently, there is a risk that the crypto assets are not managed at all or not managed in accordance with the will of the individual lacking capacity of judgement.
Therefore, it is possible to appoint a trusted or expert individual to take care of the administration of the crypto assets for the duration of the incapability of judgement, on the basis of an advance care directive. In addition, the appointed representative may be instructed to ensure that the crypto assets are managed according to specific wishes. In any case, access to the relevant information must be ensured.