How to include Crypto Assets in a Will and ensure your Executors can access them

As cryptocurrencies and other digital assets become more common, it is important to ensure that they are properly accounted for in your estate planning.

Crypto assets, such as Bitcoin, Ethereum, and NFTs, are treated differently from traditional assets due to the unique way they are stored and accessed. This article explains how to include cryptocurrency in your will and provides guidance on how to safely give your Executors access to the private keys and login details required to manage these assets after your death.

If you would like to discuss accounting for your digital assets in your estate planning, book a free initial consultation with Jane Whitfield who is the head of our Private Wealth team by calling 0800 086 2929, emailing info@elitelawsolicitors.co.uk or by completing our Free Online Enquiry Form.

Step 1: Understand the challenges of passing on Crypto Assets

Unlike traditional financial assets (e.g., bank accounts, investments, or property), cryptocurrencies are stored in digital wallets, which can only be accessed using private keys, passwords, seed phrases, or login credentials. Without these details, your Executors will be unable to access the assets. This makes proper planning and secure transmission of this information essential when incorporating any gift of crypto assets in your will.

Step 2: Include Crypto Assets in the Will

To include cryptocurrency in your will, it is important to refer explicitly to these assets and ensure they are covered. Crypto assets should be clearly defined to avoid any ambiguity and to prevent them from being overlooked by your Executors.

Step 3: Provide clear instructions for Executors

Cryptocurrencies are not automatically traceable or accessible through a probate process. Your Executors must know that these assets exist and understand how to access them. Therefore, it’s critical to leave clear instructions on where and how your Executors can retrieve the private keys, seed phrases, and any necessary login credentials.

However, you should not include private keys or sensitive information directly in the will, as the will becomes a public document after probate is granted. Instead, you should provide these details separately and securely.

Step 4: Safely storing private keys and login information

Since cryptocurrency is only accessible with the correct private key or seed phrase, ensuring that your Executors have access to this information while also protecting it from theft or hacking during your lifetime is essential. Here are a few options for storing and securing this sensitive data:

1. Cold Storage: Store your private keys offline, such as in a hardware wallet or a physical document, and keep this in a secure location, like a safety deposit box or with a trusted solicitor. This ensures the keys are not vulnerable to online hacks.
2. Trusted Custodians: You could place your private keys and seed phrases with a trusted third-party custodian (such as Coincover) who will only release the information to your Executors after your death.
3. Multi-signature Wallets: For high-value cryptocurrency portfolios, you may want to use a multi-signature wallet, which requires multiple keys to access. You could set up one of the signatures to be controlled by your Executor or legal representative.
4. Detailed Instructions: In addition to storing private keys, it is helpful to provide your Executors with instructions on how to access and manage the cryptocurrency wallets, especially if they are not familiar with the process. You may also include advice on where to find your passwords for any cryptocurrency exchanges you use (e.g., Binance, Coinbase).

Step 5: Choose a knowledgeable Executor

Managing cryptocurrency requires a certain level of technical knowledge. If your Executor is not familiar with cryptocurrencies or digital assets, it could be beneficial to appoint a co-executor or a professional adviser who has experience with handling crypto assets. Alternatively, you can include specific instructions for the Executor to seek professional advice.

If you prefer to appoint a knowledgeable crypto custodian or third-party to manage this aspect of your estate, you could direct your Executor to consult this specialist.

Step 6: Keep the Information Updated

Given the volatile nature of cryptocurrency and the frequent changes in wallets, exchanges, and security protocols, it is essential to keep your will and any accompanying documents (such as the letter containing access information) up to date. Regularly review and update the stored private keys, seed phrases, and login details, and ensure that your Executors know where to find the latest version.

Step 7: Be mindful of tax implications

Cryptocurrencies are subject to taxation, and your Executors will need to report them as part of your estate for Inheritance Tax purposes. Ensure that your Executors understand this obligation and that you provide a clear record of the assets’ value, ideally with a guide on how to calculate the value of your holdings at the date of death. It may be useful to consult a tax adviser who is experienced with digital assets for guidance on this aspect of estate planning.

There may be implications in relation to other taxes as well:

HMRC has confirmed in its crypto assets manual that:

• HMRC considers crypto assets as property, not as currency or money.
• Most individual investors will be subject to Capital Gains Tax on gains and losses on crypto assets. This will apply to Executors who sell crypto assets during the period of administration of your estate.
• Section 104 pooling applies, subject to the 30-day rule for “bed and breakfasting” with different rules for companies.
• A capital loss may be claimed in the event that a crypto asset becomes of negligible value.
• Exchange tokens such as Bitcoin are located for tax purposes wherever the beneficial owner is resident.
• VAT may need to be considered.
• Any cryptocurrency received from employment or mining count as income and the Executors would need to include that when they deal with your income tax affairs up to the date of death.

Additional considerations when leaving Crypto Assets in a Will

• Beneficiaries’ knowledge: If you are leaving cryptocurrency to beneficiaries who may not have the technical know-how to manage it, consider appointing a digital asset manager or educating your beneficiaries about how to handle these assets.
• Password management systems: Some people use secure digital password managers to store login details for wallets and exchanges. If you choose to use such a system, ensure your Executors have access to the master password for the manager.
• Non-transferable crypto: Some digital assets, like NFTs, might come with specific conditions regarding transferability. Ensure your will takes these into account.

How Elite Law Solicitors can help

Including cryptocurrency in your will requires thoughtful planning, as these assets need special handling compared to traditional ones. While it is crucial to ensure that your Executors know how to access your digital assets, you must also protect this sensitive information from falling into the wrong hands during your lifetime. By taking the appropriate security precautions, updating your information regularly, and seeking professional legal and tax advice, you can ensure that your crypto assets are smoothly transferred to your beneficiaries according to your wishes.

If you would like any further advice on making a will that includes dealing with your cryptocurrency, or about making wills in general, please book a free initial consultation with Jane Whitfield who is the head of our Private Wealth team by calling 0800 086 2929, emailing info@elitelawsolicitors.co.uk or by completing our Free Online Enquiry Form.

The content of this article is for general information only. The information in this article is not legal or professional advice. If you require legal or professional advice you should obtain independent expert advice from qualified Private Client solicitors such as those within our firm.