When crypto outlives its owner
New Zealanders are building positions in digital assets, yet some have not fully considered what happens when those assets need to pass to the next generation, and that gap between ownership and succession is where risk can quietly emerge.
Most people have heard stories about investors who misplaced their private keys and could not retrieve their cryptocurrency, and while that is troubling enough during someone’s lifetime, the consequences become far more serious when death is sudden and there has been no opportunity to explain where access credentials are stored or how they are to be used.
Blockchain networks are designed to be secure and decentralised, which means there is no central authority capable of restoring access to a lost private key, and that design feature, which protects investors during their lifetime, can leave families permanently locked out if no prior arrangements have been made.
Scott Lester, Director at Crossgate Capital, says the issue is more common than some realise.
“People focus on market performance and the long term potential of digital assets,” Lester says. “They do not always focus on the practical question of how those assets will be accessed if they are no longer here to explain them.”
The estate planning risk of self custody crypto
In a traditional estate administration process, executors work through recognised systems where property titles can be searched, bank accounts can be identified, and shares can be traced through established registers, so even if legal formalities take time, the assets themselves remain intact and recoverable.
Self managed cryptocurrency does not operate within that same framework, because while the blockchain may show that assets exist, it does not reveal who controls the private key, and if the deceased never disclosed where the seed phrase is stored, or if it exists only in their memory, the executor may have no practical pathway to access the holdings.
“Crypto is recognised as property under New Zealand law,” Lester says. “But recognition of ownership does not automatically provide access, and without the private key the executor can be left with an asset that cannot be realised.”
A structured pathway within a traditional framework
One practical response is to consider how exposure to digital assets is structured from the outset, because the form of ownership can influence how straightforward estate administration becomes.
Crossgate Capital operates as a traditional investment vehicle with shares titled in the investor’s name, and that structure integrates with established legal and estate processes in a way that direct self custody may not.
“When an investor holds shares, those shares form part of the estate in the same way as other financial investments,” Lester says. “The executor does not need to locate a hardware wallet or understand blockchain mechanics, because there is a recognised corporate and legal process.”
“Our role is to provide structured exposure to digital assets” Lester says. “If an unfortunate event occurs, the shares form part of the estate and the administrator can make contact with us to assist.”
A conversation worth having
As cryptocurrency moves further into the mainstream, a question which should be considered is whether digital assets can be transferred smoothly when required, because an asset that cannot be accessed is, for practical purposes, lost.
“The key question every crypto investor should ask themselves is whether their family would know what exists and how to access it,” Lester says.
He says that as the asset class matures, so too must the planning around it.
“Crypto investing has evolved,” Lester says. “Estate planning around crypto now needs to evolve as well.”
