DeutschHardly anyone likes to think about their own mortality. Nevertheless, death is inevitable. It is not only doctors who rightly point out again and again how important precautions are for emergencies. Not only are wishes regarding medical care important. It is also important to consider how finances should be arranged with a view to the heirs. In this way, disputes among the bereaved can be ruled out even during their lifetime. While the distribution of shares, cash and similar classic investments can be arranged relatively easily, investments in digital currencies deserve special attention. How can I bequeath Bitcoin without causing problems for my heirs? This aspect will be discussed below – from both a purely legal and technical point of view.
Not Only the Technical Side Deserves Attention
The separate consideration of the aspects in the field of technology on the one hand and the characteristics of a legal nature on the other is quite crucial. Without a technical understanding of how it works, it will be difficult for surviving relatives with claims to take up their inheritance. Terms such as wallet, personal keys and other technical terms must be known in order to benefit from the proof. Crypto owners who have misplaced or lost their access data can sing a sad song about the typical problems when accessing holdings. The legal framework for crypto inheritances is now largely equivalent to that for classic inheritances in many places. In other words, concealing large inheritances in cryptocurrencies such as Bitcoins or altcoins from Ethereum to Zcash from the tax authorities can have tax consequences. However, certain allowances also apply. Depending on the family relationship between the deceased and the heirs, no taxes may be payable.
| Worth knowing:
→ When people bequeath Bitcoin, many authorities find it difficult to determine the actual value of the inheritance. One reason for this is the sometimes enormous fluctuations (volatility) in the prices of digital currencies. |
Owners of cryptocurrencies in particular still tend to give too little or no thought to how they can bequeath currencies such as Bitcoin. However, precautions are advisable here too. After all, a major dilemma for heirs is that there is basically no assistance to restore access data to digital wallets, i.e. to crypto wallets – if this data cannot be found, access to such an inheritance fails. In the meantime, there is also specialist literature on the subject of bequeathing Bitcoin. One example is the work “Storing and Inheriting Bitcoins: A Practical Guide” by the author Markt Steiner. The basic message of such books, as well as numerous websites that deal with the inheritance of Bitcoins and Co., could probably best be summarised as follows: Early planning prevents problems after the death of a testator.
Good and Forward-Looking Planning Prevents Later Worries
In the past, there have been repeated reports of cases in which wealthy crypto owners – even “crypto millionaires” – died and relatives had to search for the so-called private keys as access data to the wallets of the deceased during an already difficult time. Not infrequently without success. Despite such headlines, many people do not take care to compile the relevant information early on for the benefit of the heirs. Crypto exchanges are often not a good advisor in times of need either. Many crypto platforms do not have instruments that enable the recovery of digital wallets. The worst-case scenario: heirs know nothing about their luck because the testator did not mention the crypto assets as part of the inheritance.
Our tip:
→ Consciously include cryptocurrencies in inheritance planning! References to wallets and exchange accounts in the will can guarantee a quick settlement.
Who Inherits What – Inheriting Bitcoin from a Legal Perspective
As in other countries, Swiss inheritance law also distinguishes between legal and appointed heirs. The former include spouses, (grand)children and other persons entitled to inherit by law. The second group includes persons without a legal claim to a share of the inheritance, but who are to be consciously considered by testators. Such distributions must be prepared by means of an inheritance contract/will. A so-called legacy can also be created. A lawyer specialising in inheritance law is the right person to contact in order to organise everything clearly with regard to the estate. Anyone who wants to bequeath Bitcoin to persons not stipulated by law must clearly stipulate this in writing. Incidentally, this also applies in the event of an emergency to life partners – regardless of how long a relationship has lasted. Otherwise, the normal legal succession applies on the basis of the prescribed distribution key.
Problems Regarding the Inheritance of Cryptocurrencies and Their Solution
Difficulties on the part of the heirs when filing their tax return: Firstly, the risk that none of the surviving relatives and heirs know anything about crypto reserves. In the worst case, holdings with enormous yield potential slumber forever in wallets that no one knows about. If testators always fulfilled their obligations as taxpayers when filing their tax returns, heirs may only become aware of claims in this context. But what data do I enter as an heir if I do not know the amount and place of storage? In Switzerland, a lack of knowledge does not release heirs from the obligation to prepare a final tax return for the deceased – if crypto assets appeared in previous returns, the responsible authority will probably become suspicious. To prevent this dilemma, testators should at least confide in one person. This includes details on how to access the data after death.
Spare the Heirs the Search for Access Data
Rarely is the saying about searching for a needle in a haystack as fitting as with crypto assets. Anyone who knows a little about digital wallets (wallets) is familiar with terms such as “private keys” or “seed phrases”. In order for heirs to access wallet content, they need such access information. Unfortunately, authorities are not of much help. As mentioned, even crypto exchanges are usually not adequately prepared for such cases. Testators should not only store the wallet-relevant data in a safe place known to the heirs. It should also be ensured that future owners know how to handle the information correctly when bequeathing Bitcoin. Especially with very volatile assets such as cryptocurrencies, time can be money. By the time heirs without prior knowledge have access to Bitcoins, the Bitcoin price may have fallen significantly again in the worst case. Of course, it could also rise steadily.
Involve Reliable and Reputable Third Parties as “Administrators”
Although testators may not imagine that disputes over the inheritance will arise after their death, anyone who wants to initiate a desired settlement would do well to entrust data to impartial third parties that they can rely on. A lawyer or notary can be such a person. With the increasing entry of banks into the crypto market, these institutions can also be helpful. If the storage location of the wallet data is known and freely accessible to several people, heirs (and not only them) could be tempted. As crypto assets leave hardly any traces, inherited Bitcoins could disappear. Without anyone knowing who stole them – except for the alleged thief, of course. In the interest of family peace, the transfer via a neutral person is the right way after the death of a testator who wants to bequeath Bitcoin.
Will and Inheritance Contract – Clear Conditions Rule out Disputes over the Inheritance
As mentioned, the inheritance-related distribution of crypto assets is closely linked to a sufficient technical understanding on the part of the heirs. They should deal with the topic in their own interest before taking any initial measures. The actual settlement is an individual question for which there is no “master plan”. Creating an access plan is advisable so that heirs receive the intended share. A clause in the will can be the best way to go. What is important here is the complete independent preparation including signature and date of issue. In the case of a “public will”, it requires certification by a notary with a licence in the respective canton, and it also requires two independent witnesses. The public variant can also be created digitally. Two witnesses are also mandatory if an inheritance contract is to regulate the legal distribution. The testator and heirs are involved in such a contract. The contractual arrangement with the inclusion of the heirs can prevent later ambiguities and conflicts.
It is recommended to include the scope and storage location of the crypto inventory in the contract and will. Access data (including passwords, usernames and other authentication notes) for accounts should be stored separately. The simple reason for this is that in Switzerland (and elsewhere) various people have access to documents. As far as the values are concerned, regular updates make sense, as the contents of the wallets may change since the last version of the inheritance goals. Perhaps testators would also like to change the distribution or not only bequeath Bitcoin because they have added other currencies such as Ethereum, Dash or Litecoin to their portfolio in the meantime.
Ensure that Heirs Handle Inherited Bitcoins Correctly
Last but not least, if testators have the slightest doubt about the crypto expertise of their heirs, they can create a kind of guide for accessing crypto assets. Or they can choose someone during their lifetime who – possibly as a paid expert – provides heirs with the necessary explanations when the time comes. In this way, people who later inherit Bitcoin learn how to handle their inheritance safely, how to trade digital currencies or how to convert holdings into fiat money. Like wills and inheritance contracts, access data can of course be stored traditionally in a bank safe deposit box, which is particularly popular in Switzerland. Many testators play it safe by storing data in several places at the same time.
If the inheritance occurs, the designated person of trust can ensure with little effort that information reaches the hands of the legitimate heirs. As mentioned, it is important that the storage location is known to someone so that the inheritance of the Bitcoins is successful as desired and without complications.
