The private key determines access
Crypto assets are not physical objects. Where they are held in self-custody, the ability to actually dispose of them depends crucially on the private key. For tax purposes, crypto assets are treated as assets and, like any other property, can be inherited or gifted.
This creates a particular feature for succession planning: the legal transfer of the asset and actual access to it can fall apart. If an heir does not know the private key or cannot find it, the crypto asset may be economically out of reach, even though it theoretically belongs to the estate.
With centralised crypto exchanges, access is usually easier. Heirs can, as a rule, identify themselves there. With self-custody, by contrast, there is no central authority that can reset a lost private key. Documentation and secure access arrangements therefore become a central element of succession planning.
Volatility can turn into a liquidity risk
For inheritance and gift tax, what counts is, in principle, the value at the relevant valuation date. In the case of inheritance, this is regularly the date of death; in the case of a gift, the time at which it is executed.
This is precisely where a considerable risk lies. Crypto assets can lose a great deal of their value within a short period of time. Tax may accrue on the basis of a high valuation date value, even though the asset is worth far less by the time the tax falls due. In extreme cases, the heirs may lack the liquidity to pay the tax.
Similar problems can arise with claims to a compulsory portion (Pflichtteil). Their calculation is based on the value of the estate at the time of death. If the crypto price subsequently falls sharply, an heir may have to pay out a compulsory portion calculated on the basis of a value that, in economic terms, no longer exists. A lost private key should not, in this context, eliminate the payment claim.
Valuation remains a challenge
There is no specific valuation method for crypto assets under inheritance tax law. In principle, the fair market value at the relevant valuation date is decisive. In practice, prices from trading platforms or established price lists can be used for this purpose. Unlike shares, crypto assets are traded around the clock on numerous platforms, and prices can differ from one another. For larger portfolios, it is advisable to document the price used and its source at the relevant valuation date in a traceable manner and, where appropriate, to take several data providers into account.
Structure gifts in good time and cleanly
Crypto assets can also be transferred by way of anticipated succession. The classic instruments of succession planning can be used for this purpose, in particular the repeated use of personal tax allowances.
What matters, however, is to record clearly the date and the technical execution of the gift. A clawback clause can also help to cushion certain risks of an unexpectedly high tax burden.
Current uncertainty stems from the planned reform of crypto taxation. The draft bill provides that “exchange-type crypto assets” acquired free of charge are, in principle, deemed to have an acquisition cost of zero euros. According to its wording, this could also capture classic gifts and possibly cases of inheritance. As a result, the established principle that the acquisition cost and acquisition date of the legal predecessor are carried over could be at risk. Through such a “step-down”, the legal predecessor’s acquisition costs would effectively be taxed twice. The further legislative process will hopefully bring clarification here.
What investors should arrange for their crypto estate
The most important precaution does not start with taxes, but with access. For heirs or executors, it must be traceable that crypto assets exist and how they can be accessed in the event of death. A digital estate file can document which wallets and platforms exist and how access is organised. The private key itself should not be left unprotected in the will or in openly accessible documents. Powers of attorney granted in anticipation of incapacity should also cover digital assets. For larger crypto portfolios, it may also make sense to appoint an executor or attorney who is familiar with their technical particularities. Where multi-signature wallets are used, clear agreements should record to whom the crypto assets are attributable under the internal relationship (and thus economically and for tax purposes).
Conclusion
Crypto assets belong in succession planning just as much as real estate, company shareholdings or securities portfolios. One crucial difference lies in actual access: without a functioning access arrangement, a significant asset can become unreachable for the heirs. Early documentation, appropriate powers of attorney, clear provisions in the will and forward-looking tax planning are therefore particularly important.
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This article is based on module 4 of the “Crypto Allocation Briefings – Practical Insights for Investors and Family Offices”. The webinar series provides a compact overview of the key topics related to crypto assets in professional asset management. It includes expert discussions on market trends, taxation in other jurisdictions, insurance solutions, as well as online and offline security. The series is aimed at investors and decision-makers who want to understand crypto, assess its role, and integrate it into existing wealth and investment structures in a legally compliant manner. Learn more here.