Can You Inherit Cryptocurrency?
Passing on your cryptocurrency in the event of death is possible, albeit more complicated than physical assets.
Firstly, a majority of crypto wallets and accounts aren’t like traditional investment accounts, with a large portion of them being self-custodial and encrypted to the point where the host of the wallet cannot access your coins even if they wanted to.
Whoever holds the keys to your wallet can access the coins inside of it. This could be a single person, an exchange or a split between both.
If you have cryptocurrency stored on an exchange, which isn’t recommended for the long term, then most exchanges will allow for the recovery of a deceased family member’s account – provided the right certifications of course.
If you have not got your coins on an exchange, rather in a cold wallet then you can still pass them on to family members. This can be done by storing vital information such as keys, PIN codes etc in a very safe place such as a bank vault. Directions on accessing the wallet along with where to find it must be provided as keys without a wallet are just random numbers and letters.
This information could be stored in your will and would be passed onto a beneficiary in the event of death. It is vital to keep this updated with the tiniest changes. If the right information isn’t provided, due to the decentralized nature of cryptocurrencies, then there is not much anyone can really do.
Is Inherited Cryptocurrency Taxable?
Inherited cryptocurrencies are not taxable at the time of their inheritance, although if you were to sell them on, then you would be taxed. This is all dependent on state and country laws on inheritance tax.
The typical inheritance tax for cryptocurrencies is treated as property. [1]US News Money – How Bitcoin Is Taxed At the time of death, the inheritance is valued and it would be subject to capital gains tax on gains made after the time of death. Although any inheritance larger than $11.7M is subject to a 40% estate tax.
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