As the use of cryptocurrency continues to rise, many people are recognising the need to protect and manage these assets, particularly in the event that they become incapacitated or unable to manage their affairs.
A Lasting Power of Attorney (LPA) is a powerful legal tool that allows you to appoint someone (your attorney) to manage your financial affairs, including crypto assets, should you lost the capacity to do so yourself.
This article guides you through how to create an LPA that specifically authorises your attorney to handle crypto assets, along with practical advice on how to safely share necessary access information such as private keys and login credentials.
If you would like any further advice on setting up a Lasting Power of Attorney to deal with your cryptocurrency, or about Lasting Powers of Attorney in general, book a free initial consultation with Meg Wilton who is the head of our Private Client team by calling 0800 086 2929, emailing info@elitelawsolicitors.co.uk or by completing our Free Online Enquiry Form.
Step 1: Create a Financial Lasting Power of Attorney
There are two types of LPA: one for property and finance matters, and one for health and personal welfare matters. To allow your attorney to manage your crypto assets, you will need to create a Financial LPA.
Step 2: Specify Crypto Assets in the Lasting Power of Attorney
When creating the LPA, it is important to include cryptocurrency expressly within the list of assets your attorney is authorised to manage on your behalf.
In the LPA form, under the section titled “Your instructions”, you should provide specific instructions related to crypto assets.
Step 3: Provide specific instructions on private keys and security
One of the most critical aspects of including cryptocurrency in an LPA is how the attorney will access these assets. Crypto assets are stored in digital wallets, which are accessed through private keys and other security credentials (such as 2-factor authentication, seed phrases, and passwords). Without these details, your attorney will not be able to manage the assets.
You should avoid including sensitive information like private keys or passwords directly in the LPA document itself. Instead, you can provide guidance on where and how the attorney can access this information. It is vital that your attorney has all the information they will need to access your wallet. If the attorney is unable to log into your account, or has not been told what your private key is, there is a significant risk of your cryptocurrency being lost.
Step 4: Security considerations
Storing and transferring access information for cryptocurrency requires very careful security precautions. Here are a few ways to manage this safely:
- Cold storage: For added security, consider storing your private keys and passwords offline, such as in a hardware wallet or written down and stored securely (e.g., a safe or safety deposit box).
- Multi-signature wallets: For higher-value crypto assets, you may want to set up a multi-signature wallet. This means that access to your crypto assets requires multiple approvals. Your attorney could be one of the signatories.
- Trustworthy custodians: Store your private keys or seed phrases with a trusted third-party custodian such as Coincover. You should then provide your attorney with instructions on how to retrieve those credentials, if necessary.
Step 5: Register the Lasting Power of Attorney
Once the LPA has been completed, it needs to be registered with the Office of the Public Guardian before it can be used. Registration can take several months, so it is important to act early.
Step 6: Notify Your Attorney
Once your LPA has been registered with the Office of the Public Guardian, you should ensure that your attorney is aware of the types of assets they will be managing, and how to access them. You may also want to provide the attorney with a high-level overview of how cryptocurrency works, especially if they are not familiar with the technology.
Additional considerations regarding Lasting Powers of Attorney and Cryptocurrency
- Regular updates: The world of cryptocurrency is fast-evolving. You should periodically review your LPA and the instructions you have left regarding crypto assets, ensuring that everything remains up to date.
- Choosing your attorneys: Appoint an attorney who is trustworthy and reliable, and who preferably has some knowledge of cryptocurrency, as managing these assets requires a level of technical understanding.
How Elite Law Solicitors can help
How Elite Law Solicitors can helpA Lasting Power of Attorney that includes crypto assets ensures that your digital wealth is managed according to your wishes, even if you become unable to manage your own affairs. However, given the sensitive nature of cryptocurrency security, it is crucial to take appropriate measures to ensure that your attorney can access your assets without compromising the assets’ safety. Make sure to consult with legal professionals to get the wording right and keep your crypto secure. This process may seem complex, but with the right instructions and proper security in place, you can ensure your digital assets are well taken care of under the LPA.
If you would like any further advice on setting up a Lasting Power of Attorney to deal with your cryptocurrency, or about Lasting Powers of Attorney in general, please contact Meg Wilton who is Head of our Private Client team by calling 0800 086 2929, emailing info@elitelawsolicitors.co.uk or by completing our Free Online Enquiry Form.
Further information on Lasting Powers of Attorney
If you need further information on LPAs, you can read our complete guide on Lasting Powers of Attorney for more detailed guidance on how they work, why they are important, and the steps involved in putting them in place.
The content of this article is for general information only. The information in this article is not legal or professional advice. If you require legal or professional advice you should obtain independent expert advice from qualified Private Client solicitors such as those within our firm.
