In an increasingly digital world, assets are no longer confined to physical properties, savings accounts, or traditional investments. A growing number of individuals are accumulating wealth in the form of cryptocurrencies and non-fungible tokens (NFTs). These digital assets present unique challenges when it comes to estate planning and inheritance, particularly in jurisdictions like the United Kingdom, where regulatory frameworks are still evolving to keep pace with technological innovation. It is essential for individuals who hold digital assets to consider how these should be handled after their death and to incorporate them effectively into their estate plans.
At their core, cryptocurrencies such as Bitcoin and Ethereum are decentralised digital currencies that are secured using cryptography and stored in digital wallets. NFTs, on the other hand, are blockchain-based digital tokens used to certify ownership of unique assets like digital art, virtual real estate, and collectibles. Due to their decentralised and often anonymous nature, these assets raise several key legal and practical concerns relating to inheritance, taxation, and access control.
Perhaps one of the most significant challenges in passing on digital assets is access. Cryptocurrencies and NFTs are stored in digital wallets, which are secured by private keys or recovery seed phrases. Unlike traditional bank accounts or physical assets, these assets cannot be accessed without the appropriate digital credentials. If a private key is lost or forgotten, access to the associated digital asset is effectively lost forever.
This makes it imperative that individuals holding digital assets ensure that these critical access details are preserved and passed on securely, yet discreetly. However, leaving private keys written down in a will poses risks: wills become part of the public record after probate, making them unsuitable for sharing sensitive information. Experts often recommend using encrypted digital storage or secure password managers and referencing these in the will, perhaps in combination with a trusted executor or solicitor who understands digital estates.
Presently, UK law recognises cryptocurrency as a form of property, following court decisions and guidance from the UK Jurisdiction Taskforce. The Legal Statement on Cryptoassets and Smart Contracts published by the Taskforce clarifies that cryptoassets can be considered property under English law, which means they can be included in an estate for inheritance purposes.
However, there remains some ambiguity surrounding NFTs. Given their novel nature and the range of assets they might represent—from digital illustrations to virtual land—recognition can depend on their specific use case and underlying smart contracts. Where NFTs are clearly established as property interests, they too may be included in a will. Nonetheless, due to their complexity and the possibility of evolving legal interpretations, it is advisable to obtain legal advice when dealing with these assets in estate planning scenarios.
The role of the executor in the context of digital assets is considerably different from dealing with traditional assets. Executors must not only understand the nature of the cryptocurrency or NFT but also know how to access, value, and transfer the asset securely and legally. There is a risk that executors who are not well-versed in digital currency could mishandle these assets, resulting in lost value or breach of regulations.
When drafting your will, consider appointing an executor who is technology literate or engaging a professional with specific expertise in managing digital estates. This is particularly crucial where large amounts of value are locked in cryptocurrencies or NFTs, as the executor will need to navigate a landscape that includes online exchanges, blockchain protocols, and regulatory compliance.
For estate planning purposes, all assets, including digital ones, must be valued accurately to assess inheritance tax (IHT) liability. In the UK, IHT is typically charged at 40% on the value of the estate above the nil-rate band, with certain exceptions and reliefs available. However, valuing cryptocurrencies and NFTs can be more complex than valuing traditional assets due to their volatile nature.
Cryptocurrencies can swing in value dramatically in short periods of time. Therefore, HM Revenue & Customs (HMRC) states that the value of these assets should be taken at the date of death. Executors may need to obtain an independent valuation or use reliable exchange rates from verifiable sources to determine the asset value accurately.
NFTs pose an even greater challenge as their market value is often highly subjective. The value of an NFT could depend on its rarity, current popularity, the creator’s reputation, and the size of the market for similar tokens. It is likely that professional appraisals will be necessary to demonstrate good faith valuations when reporting to HMRC.
Once the executor has identified and valued the digital assets, the next step involves transferring them to the beneficiaries as stipulated in the will. With cryptocurrencies, this involves transferring ownership of the digital wallet or the currency within it. This may be relatively straightforward if the necessary access credentials are available and if the executor is familiar with the process. However, in the absence of proper documentation, transferring these assets can be time-consuming, technically complex, and potentially impossible.
When transferring NFTs, the process generally requires a transaction on a blockchain to transfer the token to the new owner’s digital wallet. This can incur transaction fees and may require the recipient to have access to a compatible cryptocurrency wallet. Executors must also take special care to ensure that digital ownership is securely transferred and that there is a clear record of the transaction for tax and legal purposes.
Given the critical importance of digital access codes, it is essential to store them securely and avoid compromising privacy. The fundamental issue is how to provide enough information to ensure your heirs can access your crypto and NFTs, without exposing this information to the risk of theft or fraud during your lifetime.
Possible approaches include using encrypted USB devices, digital vaults, or dedicated estate planning tools that specialise in digital inheritance. Some individuals create a “dead man’s switch” system where passwords or access credentials are released if certain conditions are not met, such as a lack of account activity over a set period.
It is strongly discouraged to include actual access credentials directly in a will. Instead, you might reference a secured document or encrypted file location that contains the necessary details. It is also advisable to explicitly authorise your executor in your will to access digital assets and services, to avoid legal ambiguity around their role when managing these accounts.
For UK residents holding cryptocurrencies or NFTs on overseas platforms, or engaging with non-UK entities, it is important to consider international estate planning rules. Cryptocurrency operates globally, and your digital wallet could be hosted on servers in different jurisdictions or governed by terms and conditions subject to foreign law.
This may impact how the assets are accessed after your death, particularly in countries with different regulatory approaches to digital inheritance. You may be required to follow legal procedures specific to the jurisdiction of the digital asset’s platform. Consulting with a solicitor who has expertise in cross-border estate planning is therefore highly recommended.
Additionally, citizens or residents who have spent time abroad, or who have foreign domicile or domicile of origin, may also need to consider how foreign domicile status interacts with the UK’s tax on worldwide assets. The treatment of cryptocurrencies under inheritance rules in different countries can also vary significantly, which could affect the overall tax liability on your estate.
Trusts are a common estate planning tool in the UK, allowing individuals to ring-fence assets for future generations or structure distributions based on specified conditions. Cryptocurrency and NFTs can, in theory, be held in trust, though the practicalities may be complex.
Using a trust might allow for greater control over how digital assets are accessed and used after death, as well as provide greater confidentiality and tax planning options. Trustees will need to be carefully selected and must be capable of understanding and handling digital assets. This includes setting up secure custody arrangements, ensuring proper valuation, and adhering to the trustee’s fiduciary duties with respect to asset protection and growth.
It is also essential to review trust documentation to ensure it includes specific provisions dealing with the nature of digital assets. General language referring to ‘property’ or ‘assets’ may not be sufficient to cover cryptocurrencies or NFTs adequately without further clarification or instruction.
The UK’s legal and regulatory framework regarding digital assets continues to develop. In recent years, HMRC has begun issuing more definitive tax guidance for individuals and businesses holding cryptocurrencies. Nevertheless, many aspects of how these assets should be treated from a succession planning perspective remain under debate.
The Law Commission has been actively reviewing the legal status of digital assets to provide better certainty. Future legislation may offer clearer rules about digital inheritance, especially where disputes arise. Keeping abreast of new developments and updating your estate planning accordingly is critical—what may be a best practice today could become outdated if new laws are introduced.
Digital assets, by their very nature, tend to change more rapidly than traditional ones. The value of your holdings may fluctuate significantly, you may acquire new tokens, change wallet providers, or diversify your holdings across platforms. It is therefore important to conduct regular reviews of your estate plan to ensure it remains relevant and accurate.
This includes keeping an updated inventory of your digital assets, documenting any changes in how these are stored or secured, and updating any references in your will or estate letters to new access points. Involving your solicitor in this review process will help ensure consistency and accuracy across your documents.
An often-overlooked aspect of estate planning involving digital assets is the need to prepare your loved ones. If your beneficiaries are unfamiliar with blockchain technology or cryptocurrency wallets, they may struggle to appreciate or even access the inheritance left to them.
Including educational resources, simple instructions, or appointing a knowledgeable intermediary can make a significant difference. This preparation helps not only protect the value of the inherited asset but also ensures its utility and future growth is not lost due to inaccessibility or misunderstanding.
Digital assets like cryptocurrencies and NFTs are no longer fringe investments—they are becoming integral parts of modern estates. However, their unique characteristics demand a proactive and informed approach to estate planning. From secure access and proper valuation to tax compliance and legal recognition, there are several layers of complexity that must be addressed.
To ensure your digital legacy is preserved and passed on smoothly:
Maintain secure but accessible records of your digital wallets.
Appoint tech-literate executors or involve professionals with crypto expertise.
Regularly update your estate planning documents to reflect changes in your holdings.
Educate your beneficiaries so they can manage and benefit from what you leave behind.
As the law continues to evolve, staying informed and working with solicitors experienced in digital estate planning will be key to protecting your digital wealth—and ensuring it reaches those you intend to benefit.
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