Cryptocurrencies and estate administration - Hidden Treasure or Pandora’s box?

Cryptocurrencies are digital currencies. They are hitting headlines worldwide. Cryptocurrencies can be spent or traded like any other traditional currencies but, unlike other currencies, are not regulated, have no state bank or sovereign backing and only exist in digital form.

The Problem

As cryptocurrencies, such as Bitcoin and Ethereum, continue in popularity it is important to consider what happens to these assets when the owner dies (the ‘Owner’). Without knowing the details of the holding and the secure password, known as a private key, the cryptocurrencies will be inaccessible to a Personal Representative (‘PR’). As there are no regulators, a PR has no help in accessing the holding in these circumstances. The cryptocurrency will just lie dormant.

Ownership prompt

The PR needs to know that the Owner held cryptocurrencies. The Owner therefore needs to make the PR aware; this could be during the Owner’s lifetime or after death by some written means.

Many Owners would not want to tell their PR that they own cryptocurrencies for a myriad of reasons whilst alive. However, a letter placed with a Will confirming ownership of cryptocurrencies, and other digital assets that may otherwise remain un-administered, is essential. The use of a letter is best practice rather than confirming directly in the Will which becomes a public document once admitted to probate.


Once the PR is aware of the cryptocurrency, it needs to be valued as part of the usual probate process. The PR would establish the quantity and type of cryptocurrency and would then be able to calculate the value. The amount owned should be identifiable when taking the steps below. The value needs to be reported, and any associated tax paid, to HMRC as part of the usual Inheritance Tax process. There are no specific sections on the current Inheritance Tax forms which deal with cryptocurrency holdings and it should therefore be declared as a bank account.


Cryptocurrency values, to date, have been volatile and, depending on the commentary you read, will continue to increase in value or, sooner or later, the ‘bubble’ will burst. Unjustified delays in selling, or not reclaiming Inheritance Tax on a loss on a sale, would leave a PR in a very uncomfortable position and liable to the beneficiaries personally for the loss. As a PR, it would be prudent to take specialist advice quickly.


As above, cryptocurrencies are held in online wallets. For example, Bitcoin’s virtual wallet has two keys; a public key which is similar to an address for sending and receiving payments and a private key which allows the owner to gain access to the wallet and the Bitcoins inside. It is this private key that is important as without it the wallet is inaccessible and, arguably, worthless.

Owners are usually unwilling to reveal the private key in their lifetime. It’s understandable; you wouldn’t give someone details of your online banking passwords or other sensitive financial information.

What to do?

The question is therefore how can an Owner provide details of their private key after they die so the PR can access the wallet and the cryptocurrencies?

Simple solution

The private key can be noted down in a letter accompanying the Will or another allied document. Most people feel uncomfortable doing this especially if the cryptocurrency holding is substantial.

Meanwhile, most solicitors decline to take possession of passwords, and the same would be true of private keys, in line with The Law Society’s official guidance. There are also insurance issues emanating from storing passwords.

Complex solution

Another option is to create an online vault where you store details of your digital assets, such as your private key. When an Owner dies, the PR will then be given access to the vault, including access to the private key, which will allow the PR to take control and administer the cryptocurrency holding. Owners may question the security of online vaults.

Of course, there are many differing views on how to provide this information to your PR and it is often dictated by personal choice, attitude to risk, and personal and financial circumstances. As ever, estate planning works best when tailored to a specific individual and there is no one size fits all solution.

Our opinion

Albeit that it may feel like a step backwards, our opinion is that the private key should be noted down and placed in a safety deposit box with the Owner’s bank or in their safe at home. This is a secure way of storing the private key. This will allow the private key to become accessible through the normal administration process.

Our professional responsibility

Professionals assisting in an Owner’s estate planning failing to highlight potential issues and not providing practical advice could be negligent.

There will, no doubt, be innovation and development in time leading to universally accepted regulatory and compliance practices. Until then we all need to be alert to the hidden dangers of cryptocurrencies.

Lastly, all the issues that are relevant to estate administration also apply if the Owner loses mental capacity.

This article was originally published in a newsletter for Saunderson House alongside their own article: Bitcoin: The New Frontier or the Next Bubble?

The law and practice referred to in this article or webinar has been paraphrased or summarised. It might not be up-to-date with changes in the law and we do not guarantee the accuracy of any information provided at the time of reading. It should not be construed or relied upon as legal advice in relation to a specific set of circumstances.

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