The Effects of Cryptocurrency on Wills, Estate Planning and Inheritance Tax

We have come a long way since the 7th century, when the first banknotes were used in China. Today, digital assets such as Cryptocurrency, play an increasingly important role in modern finance and estate planning. Cryptocurrency is not only used for investment purposes, but it is also used for making payments. There are now over two thousand different cryptocurrencies worldwide, with some of the most well-known being Bitcoin, Ethereum, Dogecoin and Solana. 

It is now possible to purchase goods and services with cryptocurrency. Payment methods include direct merchant payments via a digital wallet, cryptocurrency debit/credit cards and gift cards. Their popularity is continuing to increase as their acceptance becomes widespread. 

As a result, Cryptocurrencies and other Crypto assets are increasingly forming parts of many individuals’ estates, and will therefore be subject to inheritance tax. The location (also referred to as situs) of assets may need to be determined to establish whether UK inheritance tax will apply to cryptocurrencies owned by individuals who are not long-term UK residents and non-resident trusts.  

There had been a question as to whether digital assets, such as Cryptocurrencies, could be regarded as property, as they do not fit neatly within the existing categories of personal property or choses in action. This has been resolved by the enactment of the Property (Digital Assets etc) Act 2025 on 2 December 2025, which provides for personal property rights to apply to this third category of assets. It is therefore clear that they can be distributed under the terms of a will and used by attorneys. 

Due consideration should be given during estate planning, will drafting, and the preparation of lasting powers of attorney, to ensure that Crypto assets are dealt with appropriately. There may well be specific instructions to deal with Crypto assets in a lasting power of attorney. 

Unlike banknotes or other valuable items such as gold or silver, cryptocurrencies are stored using a virtual wallet, which only holds the digital keys, such as a password and recovery phrase for secure access, while the currency stays in a ledger in the blockchain, a decentralised digital database.  You must keep the details of your cryptocurrency wallet somewhere safe, and let your executors and attorneys know where to find the information to enable them to access these.  

In the absence of good planning and organisation, cryptocurrencies could be lost or may become inaccessible after death. If a person dies or loses capacity and the private keys to a cryptocurrency wallet are lost, then the cryptocurrency is essentially lost forever, as the blockchains being decentralised are highly secure and a private key cannot be restored.  

Maintaining an inventory listing of your digital assets, along with the important information such as type of digital asset, amount held, wallet type and location of storage, would be a very useful tool for proper administration of your estate, as well as all user names for online accounts and specific instructions on how to access the private key to the wallet. 

Key information pertaining to your digital assets should not be included in wills or codicils as these would eventually become public documents. A sealed letter of wishes or confidential letter addressed to your executors can be stored with your will so that you know that they will be able to access and manage the digital assets. Specific authority for such letters to be shown to attorneys of a Property and Financial Affairs Lasting Power of Attorney can be provided in the Lasting Power of Attorney. 

If you require any assistance in ensuring that your digital assets are preserved, can be used for your benefit if you were to lose capacity, and can be distributed to your chosen beneficiaries after your death, please do not hesitate to get in touch with our Private Client department: privateclient@rfblegal.co.uk.