Bitcoin Inheritance Planning UK Guide

Why UK Holders Need a Specific Plan

The UK has well-established inheritance laws, but they were written for traditional assets — property, bank accounts, shares, and pensions. Cryptocurrency does not fit neatly into any of these categories. HMRC treats crypto as property for tax purposes, but the practical challenges of transferring it after death go far beyond tax compliance.

An estimated 2.3 million UK adults hold cryptocurrency. Many of them have not considered what happens to their holdings when they die. This guide provides a step-by-step framework for including Bitcoin in your UK estate plan.

Step 1: Take a Digital Asset Inventory

Before you can plan for inheritance, you need a clear picture of what you own. Create a document listing:

What you hold — Bitcoin, Ethereum, or other cryptocurrencies, including approximate amounts
Where it is held — exchange names (Coinbase, Kraken, Binance), hardware wallet brands (Ledger, Trezor), software wallets, or paper wallets
How to access it — which accounts, which devices, which passwords or PINs
Seed phrases and private keys — these are documented separately (see below) but the inventory should note that they exist and where to find them

Update this inventory whenever you make significant changes to your holdings, move funds between wallets, or open new accounts.

Step 2: Understand UK Will Requirements

A valid will in England and Wales must be:

In writing
Signed by the testator (the person making the will)
Witnessed by two people who are present at the same time

Your will should reference your cryptocurrency holdings explicitly. A general clause like “all my assets” technically covers crypto, but an explicit reference reduces the risk of assets being overlooked during the administration of the estate.

Important: Do not include private keys or seed phrases in the will itself. Wills become public documents after probate is granted. Anyone can apply to see a copy of a probated will. If your seed phrase is in the will, your Bitcoin could be stolen before the estate is administered.

Step 3: Write a Letter of Wishes

A letter of wishes is a supplementary document that accompanies your will. It is not legally binding, but it carries significant weight with executors and trustees. Crucially, unlike the will, a letter of wishes does not become a public document.

Your letter of wishes should include:

Location of your digital asset inventory
Location of your seed phrase or private key backups
Step-by-step instructions for accessing your cryptocurrency
Contact details for anyone who holds parts of a split seed phrase or multi-sig keys
Instructions for any exchange accounts (login details, 2FA recovery codes)
Guidance on whether to sell immediately or hold

Write the instructions as if the reader has never used cryptocurrency. Your executor may be a family member or solicitor with no crypto experience. Clear, jargon-free instructions significantly increase the chances of successful recovery.

Step 4: Choose Your Executor Carefully

The executor of your will is responsible for administering your estate. For a crypto-heavy estate, this person needs to be:

Trustworthy — they will have access to your private keys
Technically capable — or willing to follow detailed written instructions
Available — probate in the UK typically takes 6-12 months

Consider naming a crypto-literate friend or family member as a co-executor alongside a solicitor. The solicitor handles the legal process; the co-executor handles the technical recovery.

If you do not have anyone suitable, some specialist firms now offer executor services for digital asset estates.

Step 5: Secure Your Seed Phrase for Inheritance

Your seed phrase is the master key to your Bitcoin. Securing it for inheritance means solving two competing problems:

Security during your lifetime — nobody should be able to access your Bitcoin without your consent
Accessibility after death — your heirs must be able to recover the seed phrase when the time comes

Common approaches include:

Metal backup + sealed envelope with solicitor — engrave or stamp the seed phrase on a metal plate (fireproof and waterproof). Store one copy securely at home, and place a second copy in a sealed envelope held by your solicitor, to be opened only upon your death.
Shamir’s Secret Sharing (SSS) — split the seed phrase into multiple shares, requiring a minimum number (e.g., 3 of 5) to reconstruct. Distribute shares to different trusted parties. No single party can access your funds alone.
Multi-signature wallet — instead of splitting one key, use a wallet that requires multiple independent keys to authorise transactions. Distribute keys to family members, solicitors, and escrow services.

Each approach has trade-offs. The right choice depends on your holdings, your family situation, and your risk tolerance.

Step 6: Handle Exchange Accounts

If you hold crypto on exchanges, your heirs will need to go through the exchange’s bereavement process. This typically requires:

Death certificate
Grant of probate
Proof of the deceased’s identity
Proof of the executor’s authority

Document the exchanges you use, including account email addresses and any security settings (2FA method, backup codes). Store this information with your letter of wishes.

Step 7: Consider Inheritance Tax

HMRC treats cryptocurrency as property. This means your Bitcoin is subject to inheritance tax (IHT) at 40% on the value above the nil-rate band (currently £325,000, or £500,000 with the residence nil-rate band).

The valuation is based on the market price at the date of death. Given Bitcoin’s volatility, this can create significant uncertainty for executors trying to calculate the tax liability.

Key points:

Transfers between spouses and civil partners are exempt from IHT
The nil-rate band can be transferred between spouses
Trusts can be used to manage IHT liability, but they add complexity
HMRC expects cryptocurrency to be disclosed in the estate valuation

Consult a tax adviser for specific guidance on your situation.

Step 8: Review and Update Regularly

An inheritance plan is not a one-time exercise. Review and update your plan:

Annually, as a minimum
Whenever you buy, sell, or move significant amounts of crypto
When you change wallets, exchanges, or security setups
After major life events (marriage, divorce, birth of children)
When UK tax rules change

A plan that was accurate two years ago may be completely wrong today if you have moved funds to a new wallet without updating your letter of wishes.

Checklist

Digital asset inventory created and up to date
Will explicitly references cryptocurrency holdings
Letter of wishes written with step-by-step recovery instructions
Seed phrase backed up securely with inheritance access planned
Executor named and briefed on crypto holdings
Exchange accounts documented with bereavement process notes
Inheritance tax position understood
Review date set for at least annually

Disclaimer

This guide provides general information about Bitcoin inheritance planning in the UK. It is not legal or tax advice. Consult a qualified solicitor and tax adviser for guidance specific to your situation.

Crypto Will Writing Guide — What to include (and what to leave out) when adding crypto to your will.
Bitcoin Inheritance Tax (UK) — HMRC rules, IHT thresholds, and the CGT uplift on death.
Finding a Crypto-Literate Solicitor — How to find a solicitor who actually understands cryptocurrency.
Seed Phrase Inheritance — Secure methods for passing your recovery phrase to heirs.
Matthew Mellon: The Banking Heir Whose Crypto Died With Him — A complex security system that locked out the family it was meant to protect.

Bitcoin Inheritance Planning (UK)