Crypto estate: how to pass on Bitcoin and other cryptocurrencies properly

Hiding a gold bar in a safe place without telling anyone where it is – that’s what an unplanned crypto estate is like. The assets exist, but there’s no way of accessing them. That’s why it’s worth clarifying at an early stage how and where your cryptocurrencies are stored and how they can be accessed in an emergency.

If they are held in self-custody, access is determined solely by the seed phrase and the private key. If this information is missing, your heirs won’t be able to access the assets. However, if your cryptocurrencies are held in custody via a regulated Swiss provider, your heirs will have a clear point of contact in the event of inheritance that will help them gain access and that follows clearly defined procedures.

Why Bitcoin and other cryptocurrencies are different when it comes to inheritance

For shares in a custody account, the inheritance process follows a regulated procedure: the bank knows that the custody account exists, and heirs can apply for access using the heir’s certificate. The same applies to cryptocurrencies held in bank custody.

However, the situation is different with self-custody. In this case, there is no central authority. For the blockchain, only technical access matters. This access is granted using a private key A private key is a long, cryptographic sequence of characters that technically functions as a digital key. While a public key (comparable to an IBAN) can be shared publicly, a private key is used to digitally sign and approve transactions on the blockchain. In practice, it’s like a PIN or a signature: anyone who owns it can access the assets linked to it. or a seed phrase A seed phrase (also known as a recovery phrase) is a list of 12 or 24 random words. It acts as a kind of “master key” or emergency password. While a private key allows access to a single account, a seed phrase can be used to restore an entire wallet, including all the keys within it, for example if a smartphone is lost or hardware is damaged..

Anyone who knows the key has full access to the associated bitcoins and other cryptocurrencies, regardless of whether or not they are the legitimate heir.

Therefore, if you want a private key to be passed on to your heirs, you must clearly document how it can be accessed. Without this preparation, even a large fortune could remain out of reach for your heirs. This isn’t an error in the system; it’s the principle of self-custody, i.e. having complete control over your own assets, without an intermediary. In the event of inheritance, this very characteristic becomes the greatest weakness.

What belongs to a digital Bitcoin and crypto estate

Everything that has value online is part of the digital estate: e-mail accounts, credit on platforms, digital subscriptions, cloud data and, increasingly, cryptocurrencies. For most digital assets, heirs can request access via the provider. With cryptocurrencies, this essentially depends on where and how they are stored.

If the crypto assets are held by a bank or crypto exchange, i.e. in a custodial wallet, there’s a point of contact. The provider holds the coins in custody; access is granted via a login, password and usually two-factor authentication (2FA), a time-limited code generated by an app on a smartphone.

However, what happens in the event of inheritance depends on the country where the provider is regulated and how its inheritance processes are organized. With a regulated Swiss financial institution such as PostFinance, accounts are automatically blocked as soon as the bank is notified about the death. This is done to protect the heirs. Access is granted upon submission of the required proof of entitlement to an inheritance. Find out more about how bank transactions are handled in the event of death at PostFinance in the blog post “Bank transactions in the event of death – what do you need to do?”.

Not all providers block accounts automatically, and inheritance processes vary greatly depending on the platform and location. Foreign providers are not always familiar with Swiss inheritance regulations, and a Swiss heir’s certificate is not necessarily recognized as sufficient on foreign crypto exchanges.

If, on the other hand, the crypto assets are in a private wallet, i.e. a non-custodial wallet, the owner bears sole responsibility. Access is granted via a private key or a seed phrase – a sequence of 12 to 24 common words that acts as a master key for the entire wallet. In the event of inheritance, this is precisely where the greatest difficulties often arise if these access details have not been documented and stored securely.

How crypto assets disappear without a sound

Inheritances involving cryptocurrencies rarely fail for technical reasons, but rather due to poor preparation. Although losses may arise from cyberattacks, everyday causes are much more common: the access credentials are not documented, are poorly stored or cannot be found by the heirs. Typical examples:

• The seed phrase is written on a piece of paper tucked away in a drawer that nobody knows about and could be mistakenly thrown away during a potential property clearance.
• The access credentials for a crypto exchange are stored in a password manager, but only the deceased person knew the master password.
• A hardware wallet was set up correctly, but the PIN and seed phrase weren’t passed on. The device can reset itself if the PIN is entered incorrectly several times.

The core problem is that the blockchain doesn’t acknowledge inheritance cases. Without documented and readily available access details, the crypto assets remain blocked for the heirs, in some cases permanently.

Bitcoin and other cryptocurrencies in inheritance law: what applies from a legal standpoint?

In principle, cryptocurrencies are inheritable in Switzerland. The established legal view is that digital assets such as Bitcoin, Ethereum, etc. are subject to general inheritance law and are automatically transferred to the heirs in the event of death.

What no court can change is that, without access credentials, nobody can access the assets. The will specifies who owns the crypto assets, but the technology determines whether someone actually gets their hands on them. Both levels have to be dealt with.

There is also the question of valuation. The value of cryptocurrencies can fluctuate significantly between the date of death and the division of the estate. The valuation for inheritance is based on the market price at the time of death. The Federal Tax Administration publishes official tax values relevant to wealth tax at the end of the year. In practice, valuation as of the date of death is regularly based on market prices from recognized trading platforms. If you’d like to know how cryptocurrencies are generally treated for tax purposes, you can find more information in the article “Paying tax on cryptocurrencies − here’s how it works”.

What good estate planning involves

Most crypto inheritance problems can be avoided with careful preparation. An estate plan doesn’t have to be complicated – the main thing is that it’s complete. That’s the only way to ensure that heirs have access to the crypto assets both legally and in practice. A banking solution like PostFinance simplifies this process because regulated inheritance processes are already integrated and heirs have a clear point of contact.

Create a complete wallet inventory

Anyone who owns cryptocurrencies should document the following details in full:

• All crypto exchanges and platforms where cryptocurrencies are held, with the provider name and username.
• All software wallets, i.e. apps on smartphones or computers, with app names and the associated access credentials.
• All hardware wallets, with the location of the device, PIN and seed phrase. All physical backup media, such as metal plates (cold wallets), with their storage location.
• The smartphone with the 2FA app: details of the device’s login PIN and name of the 2FA app.

The last tax return often provides an initial indication of whether crypto positions are available.

Keep access details secure and accessible

Save the seed phrase on a hardware wallet or a fireproof metal plate  A fireproof metal plate – also known as a steel wallet – is used to permanently engrave or emboss the seed phrase in stainless steel or titanium. Unlike paper, this data carrier remains intact even in the event of extreme temperatures, house fires or water damage, thus ensuring access to the crypto assets. and keep everything in a safe deposit box or a bank locker. Store the access credentials for exchanges and software wallets in an encrypted password manager whose master password is known by a trusted person.

What belongs in a will – and what doesn’t

Seed phrases and private keys don’t belong in a will because wills are viewed by several people during the inheritance process and are part of a public procedure. A will should, however, disclose the existence of any crypto assets, where the relevant documents (wallet inventory with access details) can be found and who is appointed as a trusted person or executor.

Write a letter to your heirs

The most practical step is often the most personal one: a letter to your heirs explaining which wallets and accounts exist, where the access details are located, how to access wallets and exchanges, and who to contact in case of questions. This kind of letter is a valuable part of the estate because it provides your heirs with guidance.

Set up an advance care directive

Death isn’t the only scenario that should be addressed. Estate planning also includes the possibility of being unable to pass judgement due to illness, accident or dementia. With an advance care directive, the person concerned can determine for themselves who is permitted to act in such cases and according to which principles the assets should be managed. Without this document, the child and adult protection authority (CAPA) will assume responsibility and appoint a guardian who may not have any specific crypto expertise.

Appoint and instruct a trusted person

It makes sense to appoint a trusted person who can act as the first point of contact in an emergency. This person doesn’t have to be a crypto expert, but they should be reliable and willing to call in expert support if needed.

Bitcoin and crypto estates: from technical hurdles to lasting value

A digital inheritance rarely fails due to legal issues, but almost always because of a lack of preparation. While inheritance law provides the framework, only a complete estate plan ensures that your crypto assets actually reach your loved ones. If you plan ahead, you’ll turn a technical risk into lasting security. The blog post “Why PostFinance is offering crypto trading” sheds light on the strategic reasoning behind a banking solution.

FAQs about crypto estates