Definition
Bitcoin is digital currency that operates independently of banks or governments, secured by cryptography and recorded on a public ledger called the blockchain.
Understanding Bitcoin is essential for estate planning because it's now legally recognised as personal property in England and Wales, meaning it must be included in your will and is subject to Inheritance Tax.
What Does Bitcoin Mean?
Bitcoin is the world's first cryptocurrency—digital money that exists only online. Created in 2008 by "Satoshi Nakamoto," Bitcoin allows direct internet transactions without banks. Unlike traditional currency, Bitcoin operates on a blockchain—a public digital ledger that no single organisation controls. Only 21 million Bitcoin will ever exist, making it scarce like gold. Under the Property (Digital Assets etc) Bill 2024, Bitcoin is legally recognised as personal property in England and Wales, meaning it can be included in wills and is subject to inheritance laws.
Bitcoin is stored in digital wallets on your phone, computer, or physical hardware devices. Access requires your private key: a unique 64-character password. If Sarah sends £500 of Bitcoin to her brother David, she enters his Bitcoin address and confirms. The Bitcoin network verifies the transfer within minutes—no bank needed. This transaction is irreversible with no "undo" option. In the UK, Bitcoin is legal and FCA-regulated, though not legal tender and not covered by the £85,000 Financial Services Compensation Scheme protecting bank deposits.
For estate planning, Bitcoin presents unique challenges. Your Bitcoin is subject to 40% Inheritance Tax on estates exceeding £325,000. Unlike bank accounts where executors use death certificates and probate grants, Bitcoin requires private keys. Without these keys, your Bitcoin is permanently lost—an estimated 20% of all Bitcoin (over £100 billion) is forever inaccessible because owners died without sharing access information. You must create a secure system for executors to access private keys after death. Never include private keys in your will, as wills become public documents after probate.
Common Questions
"Do I need to include Bitcoin in my will?" Yes, Bitcoin should be included in your will because it is recognised as personal property under UK law. Without proper estate planning, your Bitcoin could become permanently inaccessible after your death—an estimated 20% of all Bitcoin (worth around £100 billion) is already lost forever because access information wasn't passed on.
"How is Bitcoin taxed when I die?" Bitcoin is subject to Inheritance Tax (IHT) in the UK just like any other asset. If your total estate exceeds £325,000, your Bitcoin holdings will be taxed at 40% on amounts above this threshold. Your executors must value your Bitcoin holdings at the time of death for probate and tax purposes.
"Can my family access my Bitcoin after I die?" Your family can only access your Bitcoin if they have your private keys or wallet passwords. Unlike bank accounts, Bitcoin cannot be recovered through standard probate procedures. You should create a secure system for your executors to access this information—stored separately from your will, as wills become public documents.
Common Misconceptions
Myth: "Bitcoin is anonymous, so my family will never know I own it unless I tell them."
Reality: While Bitcoin transactions are pseudonymous, your holdings are legally part of your estate and must be declared for probate and Inheritance Tax. Without documentation, your family may never discover it exists—resulting in permanent loss. Executors must identify all assets, and HMRC expects cryptocurrency declaration.
Myth: "If I forget to include my Bitcoin in my will, my executor can contact the Bitcoin company to access it."
Reality: There is no "Bitcoin company" and no recovery procedure. Bitcoin is decentralised with no central control. Your Bitcoin is secured by private keys—whoever has those keys controls the Bitcoin. Without key access information, your Bitcoin is lost forever. Unlike bank accounts, lost keys mean lost funds permanently.
Related Terms
- Cryptocurrency: Bitcoin is the first and most well-known cryptocurrency, setting the foundation for other digital currencies.
- Digital Assets: Bitcoin is a digital asset requiring special estate planning beyond traditional property.
- Private Key: The cryptographic password controlling Bitcoin access—without it, Bitcoin is permanently inaccessible.
- Cryptocurrency Wallet: The device where Bitcoin is stored, requiring secure management for estate planning.
- Hardware Wallet: A physical device for secure Bitcoin storage, recommended for significant holdings.
Related Articles
- Digital Assets in Your Will: Social Media, Crypto & NFTs
- Digital Estate Planning: What You Need to Cover in Your UK Will
- Cryptocurrency in Your Will: How to Pass It On
- Letter of Wishes: What Is It and How to Write One
- Where to Store Your Will Safely in the UK (2025 Guide)
- Online Will vs Solicitor: Which Should You Choose?
Need Help with Your Will?
If you own Bitcoin or other cryptocurrency, including it in your will is essential to prevent permanent loss. Without proper documentation and access planning, your digital assets could become inaccessible to your loved ones.
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Legal Disclaimer:
This article provides general information only and does not constitute legal or financial advice. WUHLD is not a law firm and does not provide legal advice. Laws and guidance change and their application depends on your circumstances. For advice about your situation, consult a qualified solicitor or regulated professional. Unless stated otherwise, information relates to England and Wales.