Digital assets are part of modern wealth
Cryptocurrencies and NFTs are no longer just objects of speculation for tech enthusiasts. They have established themselves as a serious asset class and are part of many private individuals’ investment portfolios. However, in the event of inheritance, they pose particular challenges for heirs and estate administrators: without access to the private key, the assets are effectively lost and worthless, even if they legally belong to the estate.
Not your key, not your coin – the private key as the key to inheritance
In German inheritance law, the principle of universal succession applies, i.e., the entire estate passes to the heirs upon death. In the case of crypto assets, however, this is only practicable if access – in particular the private key – is available and known to the heir. If the private key is missing, the digital assets are legally part of the estate but cannot actually be utilized. This can lead to inheritance law problems and also entails tax risks.
Real-life example:
A wealthy investor owns a crypto portfolio worth EUR 6 million. The crypto assets are spread across several wallets. After his sudden death, the heir can only access a fraction, e.g., EUR 500,000, due to a lack of access data (private key). The testator had not ensured that his heirs could find out his private keys.
This raises the question of whether the heir must, for example, settle compulsory portion supplement claims from the entire value of the crypto portfolio and whether he must pay inheritance tax on the entire portfolio, even though he has actually only been enriched to a significantly lesser extent. This could result in him being exposed to payment claims that significantly exceed his enrichment of EUR 500,000.
Ensure access to and overview of your crypto portfolio
The private key is the central access code to crypto assets. Crypto investors should therefore ensure at an early stage that this key is available in the event of inheritance.
- Document private keys securely – ideally both digitally and physically.
- Store them in a bank safe deposit box or vault.
- Specify the location and access options in your will or in a separate disposition.
An overview of the wallets and exchange accounts used is also essential. Many investors use multiple platforms and numerous wallets, which complicates the settlement of the estate. A regularly updated list of wallet addresses, exchange accounts, and access data can be crucial here.
Testamentary provisions for digital assets
A wealthy investor should always have a will that also lists their digital assets. It is also advisable to appoint a digital administrator or executor of the will – ideally a person with technical expertise whom the testator trusts. The testator should provide evidence for each of the crypto assets they hold that they were not acquired with funds that are questionable under money laundering law (proof of origin of funds). This saves a lot of hassle when exchanges and banks make inquiries. This is because the heir is usually unaware of the transaction history, and it is often impossible to reconstruct it without the testator’s assistance.
Practical example:
The testator stipulates in his will that his son should act as “digital executor.” The testator had deposited all access data, including proof of origin, in a sealed envelope in a bank safe deposit box. This allows the son to easily access all wallets and secure the assets after his father’s death.
Without precautions, there is a risk of tax disadvantages when inheriting
If the documentation is missing or the assets cannot be found, there is a risk of considerable disadvantages and, not least, excessive taxation. Even if the heir does not have access to the crypto assets due to the lack of a private key, the tax office will initially assume that the crypto assets have been transferred to the heir in full. The heir will then have to prove that the deceased lost the private key or did not disclose it to the heir. This may require expert opinions from IT specialists, affidavits, etc. – an expense that the heir can ill afford after the death of the deceased.
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Digital assets require analog precautions
Cryptocurrencies are an innovative component of modern assets – but they require classic precautionary measures. Those who act early not only protect their heirs but also preserve the value of their digital assets beyond their death. Legally compliant documentation and clear testamentary provisions are essential in this regard. Do you need support with your individual planning? We would be happy to advise you.
✅ Checklist: Securing crypto assets in the event of inheritance
This checklist will help you document and regulate your digital assets – especially cryptocurrencies – so that your heirs can access them in an emergency and no value is lost.
🔐 1. Secure access data
- Document private keys (digitally and/or physically)
- List wallet addresses and exchange accounts
- Note down access data (passwords, 2FA codes, backup codes), ideally also for tracking software (e.g. CoinTracking) in which the crypto assets are recorded in full and up to date
- Determine the storage location for the data (e.g. safe deposit box, vault)
- Appoint a trusted person who will have access in an emergency
📜 2. Adjust your will and estate planning
- Add digital assets to your will
- Keep an eye on compulsory portion claims
- Create and deposit proof of origin of assets
- Appoint a digital estate administrator
- Make arrangements for lost or inaccessible assets
- Sensitize heirs to the handling of crypto assets
🧾 3. Clarify tax aspects
- Inform your tax advisor about crypto assets
- Agree on valuation criteria for inheritance tax with your advisor
📌 Bonus tip:
Create a digital estate folder that contains all the relevant information – ideally with clear instructions for your heirs. This will help you avoid uncertainty and ensure that your digital assets are preserved.
