Cryptocurrencies and Inheritance: Who Will Get Your Bitcoin and How Can They Access It?

Just like shares or money in a bank account, cryptocurrencies can form part of an estate. Handing them over, however, can be more complicated. While with shares you can ask the broker for cooperation, with Bitcoin held in your own wallet it also matters whether the heir obtains the necessary access details.

When inheriting cryptocurrencies, it is therefore necessary to distinguish two questions: who has a legal claim to the assets and who is able to control them technically. These two things do not have to be the same.

How cryptocurrencies and shares are inherited

Shares bought through a broker are usually recorded with a financial institution. After the investor's death, the assets can be traced through statements and contracts and, once the necessary documents are provided, their transfer to the heirs can be arranged.

Bitcoin works differently. If the owner manages it in their own wallet, there is no central custodian that could release it to the heirs. Cryptocurrencies are recorded on the blockchain, but cryptographic keys are needed to transfer them. A hardware wallet protects these keys and a recovery seed phrase can make it possible to restore them.

If the family has access neither to the keys nor to the backup, the funds may be effectively inaccessible, even though the heir is their rightful owner.

Cryptocurrencies stored on an exchange

The situation is different if the cryptocurrencies are stored with an exchange or another custody provider. Such a provider usually keeps records of client accounts and may have a procedure in place in the event of the owner's death.

The heir may be asked, for example, for a death certificate, probate documents and proof of identity. The specific rules depend on the platform and the country concerned. It is therefore important to at least know with which providers the deceased had accounts.

How inheriting cryptocurrencies works in the Czech Republic

In the Czech Republic, Bitcoin and other crypto-assets can form part of the estate. In probate proceedings, the notary identifies the deceased's assets and their value. With cryptocurrencies, exchange statements, purchase history and other documents proving ownership can help.

The acquisition of an inheritance itself is generally exempt from income tax in the Czech Republic. However, a later sale of inherited cryptocurrencies may have its own tax consequences. For some crypto-assets, a three-year holding test applies under statutory conditions; when inheriting from a spouse or a relative in the direct line, the period during which the deceased held the asset may also count towards it.

The specific assessment depends on the type of asset, the circumstances of the transfer and the current tax rules.

What rules apply abroad

The inheritance of cryptocurrencies differs from country to country. In Germany, cryptocurrencies can form part of an estate much as in the Czech Republic, but there is also a separate inheritance tax with tax-free allowances depending on the family relationship.

In the United States, probate rules vary between individual states. For a subsequent sale of inherited assets, their tax value set according to the price on the date of death may be important.

In cross-border cases within the European Union, the deceased's habitual residence and any valid choice of law play a key role. The rules determining the heirs must, however, be distinguished from tax obligations.

What if nobody knows the seed phrase

If the heirs find a hardware wallet but do not know the PIN or the seed phrase, the device itself may not be enough. Without available keys or a way to restore them, transferring the Bitcoin may be practically impossible.

The bitcoins do not disappear from the blockchain, though. They remain recorded in the network, but without the corresponding key nobody can control them. Neither a death certificate nor a court decision can replace a missing key.

At the same time, it is not safe to solve this problem by storing the seed phrase in an ordinary e-mail or an easily accessible shared document. Such a solution could put the funds at risk while the owner is still alive.

How to prepare for a digital inheritance

The most important thing is to create an overview of cryptocurrencies, wallets and the services used. The family or a designated administrator should know what assets exist and where to look for the necessary information. It is also useful to keep records of purchases and transaction history.

Legal documents, such as a will, should build on a secure technical access plan. It is not necessary to give the family full control over the cryptocurrencies during your lifetime, but there must be a well-thought-out procedure for taking them over in the future.

For larger amounts, more advanced solutions can help, such as multi-signature wallets (multisig). Even these, however, are no substitute for clear legal instructions and an understandable plan that the heirs can actually use.

Can smart contracts solve inheritance?

Some blockchain technologies make it possible to set up automated rules for managing and transferring funds. A smart contract on its own, however, cannot reliably determine whether the owner has died, nor determine who is legally entitled to inherit.

In the future, linking secure management of digital keys with standard probate proceedings may therefore be more beneficial than replacing them entirely with technology.

Conclusion

Cryptocurrencies can be inherited, but a legal claim does not yet guarantee actual access to the funds. For assets stored on an exchange, the service provider can help, whereas with a self-custody wallet everything also depends on the secure handover of the keys.

Anyone who holds cryptocurrencies should therefore think not only about securing them during their lifetime, but also about handing them over to the next generations. It is not enough to determine who will inherit the assets. You need to make sure that the heirs will actually be able to get to them.

This text is for informational and educational purposes only and does not constitute investment, legal or tax advice. Crypto-assets are volatile and you may lose the entire amount invested.