Inheriting cryptocurrency

Estate planning in the digital age: Inheriting cryptocurrency

Oct 14, 2021 11:43:13 AM

By Jade Gani, Head of Wills and Probate at Aston Bond

Cryptoassets (more commonly known as cryptocurrency) are digital virtual currencies-of-sort that use encryption technology, or cryptography, in their creation to ensure the security of transactions involving their use. The original cryptoasset was Bitcoin, but there are many others including Dogecoin, LiteCoin and Ripple.

However, whilst holding a value, cryptoassets are not treated by HMRC as actual (traditional) currency or money, with HMRC stating that "a trade in cryptoasset exchange tokens would be similar in nature to a trade in shares, securities, or other financial products" with case law which treats share trading as a benchmark for the tax treatment of cryptoassets.

Cryptoassets, therefore, have tangible tax and financial implications despite their intangible nature. With the current total market value of cryptocurrencies estimated at £1.75 trillion worldwide, understanding the nature of these assets is becoming increasingly important to the private client practitioner and those looking to estate-plan.

Virtual wallets & digital 'keys'

The cryptoassets use a virtual ‘wallet’ that contain digital ‘keys’ that are needed to access the cryptocurrency. There are a number of different ways to store digital wallet information including:

1. A ‘hot wallet’ – the private key is kept online. The risk here is that it may be targeted by fraudsters;

2. A ‘cold wallet’ – where the key is written on paper, kept on a USB stick, or an offline computer. All of these can be stored in a safe for security;

3. A ‘hosted wallet’ – where the private key is held by a third-party service; or

4. Banks – some banks allow cryptocurrencies to be bought and sold from a new bank account. They also store wallets and private keys on behalf of clients.

There is no central organisation in charge of these digital wallets, so although the person’s Executors might be able to prove who they are and can provide copies of the death certificate and Will, it does not help when there is no organisation or regulator to take this information to. Failure to plan for the succession of these types of assets appropriately can therefore cost the estate significantly.


The actual cryptocurrency lives in a digital ledger which is supported by a technology called blockchain. Blockchain is essentially a digital ledger that is extremely difficult to hack, change or cheat. This ensures that it is secure enough to store valuable cryptoassets.

Blockchain is a decentralised and extremely secure process, and there is no way of restoring a private key. Even where Executors can evidence their authority in a valid Will and produce an original death certificate, accessing the cryptocurrency without the wallet information will be difficult because there is no central organisation managing these digital wallets to help the Executors and would-be beneficiaries.

How to plan

Whilst there is not a concrete legal stance on planning the inheritance of cryptocurrencies, we do know that cryptocurrency is treated in a similar way to other property assets that can be owned, gifted and inherited. However, it is not enough to simply include mention of cryptocurrency in a Will.

These are the key things to consider when taking instructions for a Will to ensure the cryptocurrency is accessible when the estate is being administered:

1. Whilst you could include information about your client’s digital wallets in their Will, never put any specific details about the cryptocurrency or the digital key in the Will document itself. This is because once a Grant of Probate has been obtained, the Will becomes a matter of public record, leaving the information open to fraudsters.

2. Encourage your client to create a Letter of Wishes with their Will which includes passwords, digital keys and PINs. You must ensure this is stored securely with the original Will.

3. If your client’s Executors are unlikely to have personal experience with cryptoassets themselves, encourage your clients to include a step-by-step guide within their Letter of Wishes to explain how they can access the cryptoassets to distribute, sell or transfer to beneficiaries in accordance with the terms of their Will.

These steps are simple yet extremely important: if a person dies without leaving information about the private keys to the digital cryptocurrency wallet, the cryptocurrency will be lost.

This article is featured in the autumn 2021 edition of the quarterly news digest, Entitlement. Click the image below to download your free copy of Entitlement for more informative articles.

Download the autumn 2021 edition of Entitlement

Topics: Entitlement, Estate administration, Cryptocurrency