Inheritance Of Cryptocurrency Under Forced Heirship Laws: Implications For Scots Succession Law
by Bhakti Wadehra
‘No department of municipal law is more intimately connected with the state of society than that which relates to the rights of heirs, and the rules of descent; and in none perhaps are differences so essential to be found in comparing the laws and institutions of various countries.’
- Professor George Joseph Bell, Commentaries on the Law of Scotland (1826)
Forced heirship in Scotland is designed to protect close relatives from being disinherited, ensuring they receive a portion of the deceased's movable property. However, in the dynamic landscape of modern asset ownership, the proliferation of cryptocurrencies poses unique challenges for Scotland's inheritance laws that strain the administrative boundaries of and further weaken the limited protection afforded by its forced heirship system.
Today, cryptocurrencies have become mainstream investment vehicles in Scotland but it has not officially recognised these digital assets as property, unlike the broader United Kingdom. Furthermore, even within the UK, the specific implications of cryptocurrencies for inheritance law remain largely unexplored. The Law Commission has only broadly suggested that cryptocurrencies should be included in estates for the purposes of inheritance1, without addressing the unique challenges that cryptocurrency poses in terms of succession.
Should the Scottish government align with the UK government's stance and recognise digital assets as property, significant challenges threatening to widen the gap in legal protection for families under the forced heirship system emerge. The intrinsic characteristics of cryptocurrencies—such as volatile values, access issues, ease of concealment, and global accessibility—present administrative challenges that the traditional heirship frameworks are ill-equipped to handle.
For example, the value of cryptocurrencies can experience extreme fluctuations within very short periods. This inherent volatility complicates the process of estate valuation, making it difficult to ensure equitable distribution amongst heirs. The forced heirship system relies on a predictable valuation of assets to determine fair shares for each beneficiary. The unpredictable nature of cryptocurrency values could lead to disparities in inheritance, with beneficiaries receiving assets that could sharply increase or decrease in value shortly after distribution.
Another challenge is the borderless and intangible nature of cryptocurrency which is often shielded by robust cybersecurity measures such as firewalls. This makes it easy for them to be concealed in digital wallets, inaccessible without the knowledge of specific domains, passwords, or private keys. Where these aren’t provided (e.g. cases of intestacy/ sudden death), there’s a possibility of assets being irretrievably lost leading to the inability of heirs to realise a monetary value for them.
Since digital assets have not yet been considered from a succession perspective by either the Scottish or UK government, there is no regulatory framework to identify these hidden vaults and therefore, executors may face significant hurdles in valuing and distributing an estate. Even if regulations to track them are considered, they need to accommodate the ability of these assets to be hidden in non-trackable international digital repositories. These unique characteristics also enable estate holders to intentionally circumvent the broader succession and specifically forced heirship rules and go against the fundamental family protection tenets of the Scottish law.
Building upon the wisdom of Professor George Joseph Bell’s quote mentioned above, incorporating digital assets into Scotland's forced heirship laws necessitates a nuanced examination of traditions that have addressed the succession of digital assets within their forced heirship systems. This approach will enable Scotland to craft informed and effective succession legislation that both accommodates the unique characteristics of digital assets and upholds the protective intent of its succession laws, ensuring equitable treatment of heirs in the digital era.
1 Law Commission, Digital Assets: Final report (Law Com No 412, 2023) para 1.6.
ABOUT THE AUTHOR
Bhakti Wadehra is a second year LLB (Hons) student at the University of Edinburgh. She also works as a Careers Service Assistant and Legal Research Assistant within the university.
