As cryptocurrency becomes increasingly mainstream, more people now hold cryptoassets such as Bitcoin, Ethereum, or NFTs as part of their personal wealth. At Heritage Estate Planning, we’re seeing a growing number of clients ask how to include cryptocurrency in their will.
Because crypto is intangible and highly secure by design, it’s vital to plan carefully; otherwise, these assets could easily become inaccessible or lost after you die. This guide explains what cryptocurrency is, how it’s stored, and the key steps to ensure your digital assets are properly accounted for in your estate planning.
What is Cryptocurrency?
Cryptocurrency is a virtual digital currency that uses encryption technology (known as cryptography) to secure transactions. The first decentralised cryptocurrency, Bitcoin, launched in 2009, and today, thousands of alternatives exist, including Ethereum, Ripple, and Cardano.
Each digital coin’s ownership is recorded on a public ledger called the Blockchain. For tax purposes, HMRC treats trades in cryptoassets similarly to trades in shares, securities, or financial products. This means there can be tangible tax and financial implications, even though the assets themselves are intangible and often volatile.
Globally, the cryptocurrency market is valued at nearly £2 trillion, with digital assets and blockchain-based products, such as NFTs (Non-Fungible Tokens), continuing to grow in popularity. For example, Beeple’s famous NFT artwork “Everydays: The First 5000 Days” sold for over £50 million at Christie’s, highlighting how significant this asset class has become.
What is the Blockchain?
The Blockchain is a secure, digital ledger that records transactions in linked “blocks” of data. Each block connects to the previous one using cryptography, and transactions are verified across a network through consensus.
Once a block is added to the chain, it cannot be altered, making blockchain technology extremely secure and tamper-proof. Every transaction is timestamped, proving when it took place and ensuring a permanent, transparent record of ownership.
Understanding Digital Wallets and Private Keys
To store, send or receive cryptocurrency, you’ll need a digital wallet. This wallet connects to the Blockchain and allows you to make transactions.
Each wallet has two essential components:
- Public Key: This is like your receiving address; it can be safely shared if someone wants to send you cryptocurrency.
- Private Key: This acts as your secure password and must be kept strictly confidential. If your private key is lost or stolen, you permanently lose access to your cryptocurrency.
There are four main types of digital wallets: web, software, hardware, and paper, each offering different levels of convenience and security. Because lost private keys cannot be recovered, it’s crucial to plan ahead and ensure your executors know how to access them when the time comes.
Including Cryptocurrency in your Will
When creating or updating your will, it’s essential to include your digital assets. You should:
- Add a digital assets clause that grants your executors the authority to manage your cryptocurrency.
- Consider appointing a specialist executor who understands how to handle digital currencies if your main executors lack experience.
- Never include private keys within your will itself. Once probate is granted, your will becomes a public document, and publishing private keys could expose your assets to theft.
Instead, store private key details securely in a Letter of Wishes, which remains confidential and can accompany your will. In this letter, you can include a step-by-step guide on how your executors should access your wallets and assets.
Protecting your Crypto for the future
Cryptocurrency can form a valuable part of your estate, but without the right planning, it can easily be lost forever. Ensuring it is properly documented in your will and accompanied by clear instructions will give you and your loved ones peace of mind.
At Heritage Estate Planning, we can help you safeguard your digital wealth through expert will writing and estate planning advice. We offer a free consultation appointment and would be happy to discuss any questions or concerns you have around digital currency.
