Cryptocurrency and other digital assets sit in an awkward category: legally property, technically self-custodied, and almost always unrecoverable if the owner dies without leaving the right information.
This article walks through how UK law treats cryptocurrency, what happens to it on death, and the practical steps every crypto holder should take to make sure the asset doesn't quietly disappear.
What "digital assets" covers
In a will-writing context, digital assets typically means:
- Cryptocurrency - Bitcoin, Ethereum, stablecoins, the rest.
- NFTs and other on-chain assets.
- Tokenised investments - holdings on platforms like Coinbase, Kraken, eToro.
- Stablecoin balances in DeFi protocols.
- Domain names (a recognised intangible asset).
- Online business assets - established e-commerce sites, monetised social accounts.
This article focuses on cryptocurrency and on-chain assets, where the recovery problem is sharpest.
How UK law treats crypto for inheritance
In 2019 the UK Jurisdiction Taskforce confirmed that cryptocurrency is property under English law. That settled a long-running question and means:
- Crypto can form part of an estate.
- A will can direct who inherits it.
- It can be subject to inheritance tax (it's not exempt or special-rate; it's just an asset).
- Probate processes apply.
But none of that solves the core practical problem: crypto held in self-custody is only accessible to whoever has the private keys.
The recovery problem
There are two ways to hold crypto:
Custodial (held on an exchange or platform)
Examples: Coinbase, Kraken, Binance UK. The platform holds the private keys; you have a username, password, and 2FA.
On death, the executor can apply to the platform with a death certificate, Grant of Probate, and proof of identity. Most major exchanges have published processes for this. Funds can usually be transferred to a wallet the executor controls or sold for fiat and remitted to the estate. It's like a foreign bank account - awkward, but recoverable.
Self-custody (you hold the private keys)
Examples: hardware wallets (Ledger, Trezor), software wallets (MetaMask, Phantom), or paper wallets.
There is no recovery process at all without the private keys or seed phrase. If you've memorised the seed and never written it down and you die suddenly, the crypto is permanently inaccessible. There is no support line to call. There is no "forgot password". The blockchain doesn't have a probate desk.
The estimated value of permanently lost crypto is in the tens of billions of pounds globally. A meaningful proportion of that is from death.
What needs to be in place
A working digital-legacy plan for crypto has these elements:
1. An asset list
What you hold, where, and roughly how much. Update annually. Examples:
- "BTC and ETH on Coinbase UK - account [email]"
- "Hardware wallet (Ledger Nano X) - 12-word seed phrase stored in [location]"
- "MetaMask software wallet - seed phrase in password manager"
2. Recovery instructions for self-custody assets
The seed phrase or private keys themselves, in a form your executor can find but a stranger can't. Common arrangements:
- Password manager with an emergency-access contact (cleanest for software wallets).
- Engraved metal backup in a fireproof safe at home.
- Sealed envelope with a solicitor or with a will-storage service.
- Split shares (Shamir's Secret Sharing) - the seed is split into pieces, no individual piece is enough, but combining N of M pieces reconstructs it. For larger holdings.
What you must avoid:
- Cloud storage of seed phrases unencrypted (security disaster).
- Telling no-one (recovery disaster).
- Including the seed phrase directly in the will (it becomes part of the probate record - public).
3. A reference in your will
The will references where the recovery instructions are held - not the seed phrase itself. Example wording:
> I leave my cryptocurrency and other digital assets to my children equally. The recovery information is held in [name of password manager] / [solicitor's safe] / [sealed envelope numbered XYZ in my filing cabinet]. My executor should consult that information promptly.
4. A technically capable executor (or co-executor)
Probate-savvy is good; crypto-savvy is better for crypto inheritance. If your usual executor is a non-technical sibling, add a co-executor or trusted helper who understands wallet recovery. They can be informal - the formal executor is still the legal authority - but a tech-comfortable helper makes the difference between recovery and loss.
For complex estates, we recommend you seek assistance from a Trusted Hands Advisor or your own legal advice.
Inheritance tax on crypto
Crypto is just another asset for IHT. The estate is valued at the fair market value at the date of death, and IHT is paid at the standard rates above the available nil-rate band.
A few wrinkles:
- Volatility. A holding worth £400,000 at the date of death might be worth £200,000 by the time the executor gets the keys. The IHT was calculated on the first figure. Rapid execution is worth it.
- Currency. UK IHT is in sterling. Crypto values must be converted at the date-of-death rate. Document this clearly.
- Capital gains tax still applies to disposals after death by the estate or beneficiaries. Beneficiaries inherit at "probate value" - so any gain from probate value to sale is taxable.
- Non-UK exchanges. A UK-resident who held crypto on a non-UK exchange still has UK IHT exposure on it (subject to domicile rules).
For more on the wider IHT regime, see our IHT explainer.
What about staking, DeFi, and lending positions?
Same principles apply, but with a few extra wrinkles:
- Active staking positions may be locked for unbonding periods (days to weeks).
- DeFi loans may need to be wound down before the underlying collateral can be transferred.
- Liquidity pool positions can be in profit or loss when withdrawn.
Document specifically: which protocols, which wallet, what unwinding steps are needed.
NFTs
NFTs are a special case of on-chain assets. They're property in UK law (per the same Taskforce conclusion) and fall under the will and IHT in the same way as cryptocurrency. Valuation can be hard - many NFT markets are illiquid - and a probate valuation may need to be attached to a specific recent comparable sale.
What about hardware wallet manufacturers?
Hardware wallet manufacturers (Ledger, Trezor) cannot recover funds. The whole point of the device is that only you have the seed phrase. If you die without sharing it, neither the manufacturer nor anyone else can help your family.
Some wallet platforms now offer optional recovery services (Ledger Recover, for example) where the seed is split and held by independent custodians. These are a controversial design choice but worth considering for legacy purposes.
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Frequently asked questions
Can my will name a specific cryptocurrency wallet?
Yes - and it's a good idea. The will can specify "the contents of my Ledger Nano X wallet, recovery information held in the file XYZ" rather than just "my cryptocurrency".
What if my crypto is on a foreign exchange?
UK IHT still applies if you were UK-domiciled. The recovery process depends on the exchange's procedures - some have UK-friendly probate processes, others don't.
How is crypto valued for probate?
At the fair market value on the date of death, in sterling. Use a major UK exchange's spot rate. Document the source. For illiquid tokens, expect HMRC to scrutinise the valuation and prepare to evidence it.
Can I just give my heir my private keys while I'm alive?
You can - and it's effectively a gift, subject to the seven-year rule for IHT. If you survive seven years it's outside your estate; if you don't, it comes back into the estate at the value at the date of the gift. See our seven-year rule article.
What's the simplest setup if I just hold a small amount on a major exchange?
Make sure your executor knows the exchange exists, has access to your account credentials (via a password manager with emergency access), and that the exchange has a documented probate process. That's enough for most everyday holdings. Self-custody requires more deliberate planning.
Don't let crypto vanish on death - document it deliberately. Start your will online and use Trusted Hands' Digital Vault for the recovery information.
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