As cryptocurrency ownership has become mainstream with millions of UK residents holding crypto assets across exchanges and personal wallets, the issue of what happens to those assets when the owner dies has moved from an edge case to an urgent planning priority. And the law is struggling to keep up.
This guide explains the unique challenges that cryptocurrency creates for estate planning, and what you should be doing to make sure your digital wealth reaches the people you want to have it.
Why Standard Wills Often Don’t Work for Crypto
A traditional Will deals with assets in the traditional sense, bank accounts, property, investments held with financial institutions. The executor of your estate can contact those institutions, prove their authority, and access the assets.
Cryptocurrency doesn’t work like that.
There is no bank or institution to call. There is no customer service team to recover access. Cryptocurrency held in a personal wallet is controlled entirely by a private key, a long string of characters that, if lost, means the crypto is inaccessible forever. No court order, no letter of administration, no legal authority in the world will recover access to a wallet whose private key is unknown.
Even cryptocurrency held on an exchange has complications. Exchanges require identity verification, and many will not deal with executors even where a Grant of Probate is obtained, or have their own complex procedures for deceased account holders.
A Will that simply says “I leave my cryptocurrency to [person]” is, in most cases, useless, because it provides no information about where the crypto is held, how to access it, or what the private key or recovery phrase is.
The Access Problem
The fundamental challenge is a tension between security and succession. Cryptocurrency is designed to be secure precisely because access to it is highly restricted. The same features that protect your crypto from hackers make it extraordinarily difficult to pass on when you die.
There are broadly three scenarios for where your crypto might be held:
Hardware wallet or self-custody — you hold your own private keys. If you die without leaving your private key and recovery phrase in a form your executor can access, the crypto is gone. Forever.
Software wallet or mobile app — similar position to hardware wallet. The app may be locked with a PIN or biometrics. Without access credentials, the crypto is inaccessible.
Exchange account — your crypto is held by a third party (like Coinbase, Binance, Kraken). Your executor will need to go through that exchange’s deceased account holder process, which varies widely and can be lengthy and uncertain.
What Should You Do?
Estate planning for cryptocurrency requires a different approach from traditional estate planning. Here is what a proper plan should include:
A secure inventory. Create a comprehensive record of all your crypto holdings, which exchanges you use, which wallets you hold, and crucially, the information needed to access each of them. This is sensitive information that must be stored securely — not in the cloud, not in an email, and not anywhere easily accessible to bad actors.
A secure mechanism for passing that information on. The access information should be stored in a way that can be found and used by your executor or a trusted person after your death, but cannot be accessed by the wrong people before then. Options include a sealed letter kept with your Will by your solicitor, a secure physical location known to a trusted person, or a specialist digital legacy service.
Clear instructions in your Will. Your Will should specifically address your crypto assets, naming them, directing where they go, and referring to the instructions for accessing them. Generic references to “digital assets” may not be sufficient.
Consideration of a trust. For significant crypto holdings, a trust structure may offer advantages in terms of both succession planning and inheritance tax. A professional trustee can be given the authority and information to manage crypto assets across generations.
Updated beneficiary designations. If you hold crypto on an exchange that offers beneficiary designations, ensure these are up to date and coordinated with your overall estate plan.
The Inheritance Tax Position
Cryptocurrency is subject to UK Inheritance Tax (IHT) in the same way as other assets. The value of crypto held at the date of death forms part of the estate for IHT purposes. Given the potential for significant fluctuations in value, this requires careful planning, particularly for larger holdings.
HMRC expects cryptocurrency to be reported and valued in estates. Executors who fail to properly account for crypto holdings even inadvertently, because they did not know about them, can face penalties.
Saracens Solicitors: Estate Planning for the Digital Age
Our estate planning team advises clients with crypto and digital asset holdings on how to ensure those assets are properly protected, documented, and passed on according to their wishes. We work with clients to create Wills and estate plans that reflect the realities of modern wealth, including the unique challenges that cryptocurrency presents.
For international clients with assets in multiple jurisdictions, we also advise on cross-border estate planning, ensuring your global estate, including digital assets, is structured as efficiently as possible.
This blog is for general information only and does not constitute legal advice. Cryptocurrency values fluctuate and individual circumstances vary.
