Cryptocurrency wallets, NFT collections and digital business interests present unique succession challenges. This guide explains how South African law treats digital assets and how to protect them.
The Emergence of Digital Asset Estates
The value of digital assets held by South Africans has grown dramatically over the past decade. From cryptocurrency holdings on exchanges such as Luno and VALR, to NFT collections, online business accounts, domain portfolios and social media monetisation rights, the aggregate value of digital property in many estates now rivals traditional tangible assets. Yet the legal frameworks governing digital asset succession remain nascent, creating significant risks for both testators and beneficiaries.
Ownership vs. Access: The Core Legal Distinction
A fundamental distinction governs digital asset succession. When a testator holds Bitcoin in a self-custody wallet, they own the underlying asset. When they hold cryptocurrency on a centralised exchange, they hold only a contractual claim subject to the exchange's terms of service. Many exchanges' terms expressly prohibit account transfer on death, creating a practical barrier even where the legal right to the asset is clear.
Cryptocurrency: Practical Succession Planning
Self-Custody Wallets
Where a testator holds cryptocurrency in a self-custody hardware or software wallet, the asset passes as part of the estate provided the executor can access the wallet. This requires secure transmission of private keys or seed phrases. We recommend a structured approach: private keys stored in a sealed envelope held by a trusted attorney; seed phrases held separately by a nominated custodian; and a digital asset memorandum (kept separate from the will to avoid public disclosure) detailing all holdings and access credentials.
Exchange-Held Cryptocurrency
For exchange-held assets, the executor must be authorised in writing to engage with the exchange's deceased estate process. Most major exchanges have developed deceased estate procedures, but these vary significantly in their documentation requirements. Prompt engagement is essential as market volatility can significantly affect asset value during administration.
NFTs and Intellectual Property Rights
Non-Fungible Tokens present additional complexity. The NFT itself — a unique blockchain token — may be transferred on death like any other cryptocurrency asset. However, the intellectual property rights associated with the underlying artwork or media may be entirely separate and governed by copyright law. A will should specifically address the distinction between the NFT token and any associated IP rights, and whether the testator wishes to bequeath these rights together or separately.
South African Legal Framework
The Administration of Estates Act 66 of 1965 applies to digital assets as part of the general estate. The Master of the High Court requires disclosure of all assets, including digital assets, in the Liquidation and Distribution Account. The South African Revenue Service (SARS) treats cryptocurrency as an asset subject to both capital gains tax and income tax depending on the nature of trading activities. Estate duty and CGT implications on death require careful planning with both legal and tax advisors.
How Mashiane Attorneys Can Assist
Our Estates and Legacy practice provides comprehensive digital estate planning: digital asset inventories; digital asset clauses for wills and trusts; executor guidance on digital asset administration; and tax planning for crypto estates. Contact us at hello@mashiane.law for a digital estate planning consultation.