The best way to ensure your estate, including digital currencies, are distributed as per your wishes, is to write a Will. 

Bitcoin. Ripple. Ethereum. Litecoin. Dogecoin. To some, these words look like gibberish, but the reality is, they are all different types of cryptocurrency.

Cryptocurrency is digital money which uses encryption techniques to generate currency and verify the transfer of funds. It has been designed to be quicker, cheaper and more reliable than our regular government issued money, removing the middleman in all transactions. Through specialised exchange sites, like Coinbase, you can buy and sell cryptocurrency i.e. Bitcoin, using traditional currency (GBP). These exchanges have inbuilt virtual wallets to store your purchased cryptocurrency, acting in the same way a traditional 'pocket' wallet would.

As an individual, one of the many advantages of cryptocurrency is that ownership can be pseudonymous, meaning it’s possible to send and receive cryptocurrency without giving any personal identifying information. As one of the UK's leading estate administration providers, these ever-growing digital currencies have us wondering about the many ways cryptocurrencies could impact an estate. 

  1. If ownership is pseudonymous, how do you know when someone owns cryptocurrency?

There is no way of knowing when someone owns cryptocurrency in the same way that there is no way of knowing someone has a bank account with Barclays; you won't know unless they tell you. In order to gain access to someone's wallet, you will need to know the public and private keys. These keys are essentially the code, or passwords, that log you into the virtual wallet to buy and sell the cryptocurrency from the exchange. Without this information, the cryptocurrency wealth is unreachable. It's worth noting, there are some exchanges who have policies in place to transfer cryptocurrency to the next of kin.

  1. Could cryptocurrency impact the amount of inheritance for an individual?

Absolutely. Even though cryptocurrency isn't yet an official currency of any country, it is widely accepted as a money in various countries. In the UK, you can hire a private jet or buy a round of beer with your cryptocurrency. In the United States, you can even pay for a funeral using Bitcoin. It is theorised that cryptocurrencies will become the norm with the question being when, rather than if. As reported in January this year, HMRC treats cryptocurrencies as all other currencies stating that it is an intangible asset for capital gains tax purposes. Cryptocurrency needs to be seriously considered when writing Wills to avoid hefty Inheritance Tax bills.

  1. What would happen to the owned cryptocurrency should the owner die, with or without a Will?

As we now know, cryptocurrencies are stored in a virtual wallet. Each wallet uses a string of random characters called a “public key”, visible to anyone, as an address for sending and receiving the cryptocurrency. A separate “private key” allows the owner access to the money in the wallet. If an owner dies without passing on the private key, the wallet may be discovered only to realise that they will never gain access to the wealth inside. To prevent this, the owner has to ensure that someone knows about the currency and gets a copy of the private key.

In both instances where there is a Will or there isn’t, the owner must share the private key for others to access the wealth in the wallet. If a Will is written, the cryptocurrency will be distributed as per the wishes written. If there is no Will and the private key is known, the cryptocurrency will be added in with the total value of the estate and distributed following the rules of intestacy. 

The best way to ensure your estate, including digital currencies, are distributed as per your wishes, is to write a Will. 

Stephen James Drury & Associates will also keep your logins and passwords safe in secure storage along with your Will until needed by your loved ones.


For further information or assistance, please contact us via:

  Telephone: (01529) 306005 or
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