Bequeathing Bitcoin: Three Steps to Ensuring Cryptocurrencies are Passed Down Properly

Scott Binns


Digital currency or digital money is an internet-based medium of exchange. Cryptocurrency is a digital currency with no centralized authority that leverages cryptography (encryption techniques) to secure transactions and prevent counterfeiting issues. The internet provides us with the instantaneous transfer of information whereas crypto, together with blockchain technology, allows for the instantaneous transfer of value.

You might ask, isn’t that what a bank does? The difference is in the decentralization of power. While we use banks and central authorities to store our money, we relinquish total control to them, as they control the amount of money that needs to be printed and circulated. Cryptocurrencies were born out of the idea that the collective ‘we’ (participants/society) can “take back” or regain control of our money (decentralization) while transacting in a more secure and cost-efficient manner.

But there’s a catch! What happens to your cryptocurrencies when you pass away? At its core, a cryptocurrency is meant to be protected and hard to trace. If there is a death, there is no 1-800 number to call to resolve the issue and transfer the assets. If bequeathing crypto is not properly planned out, it will likely be lost in a digital abyss upon death.

Here are three important things to keep in mind when bequeathing cryptocurrencies:

1 - Include it in your will!

This one seems pretty obvious, but it’s important to consider. When we think of what we want to include in our will or estate plan, we might consider who will get the house, who will get great-grandma’s antique vase, or how the portfolio will be divided… your cryptocurrencies should be part of your will just as much as anything else. Consider who will inherit them? Should it be split among your beneficiaries? Should it be transferred to a charity of your choice upon death?

Making sure that this critical asset is written into your will is a great way to ensure that it is not lost in the digital world forever. Effective will and estate planning, while difficult to think about, is a necessary step to prepare your family for when you are no longer here.

2 - Keep your passwords safe and secure, but let your heirs know where to find them

While we don’t necessarily advise writing down your password, also known as a private key or address, and emailing it to someone, or keeping it in your will for that matter, it’s important to consider how and when the location of your password will be passed down to a beneficiary. Some people keep it on their person at all times via a USB key, others keep it in a secure location in their homes or locked in a safety deposit box at a bank – yes, a bank! It’s ironic to think that the very nature of crypto was meant to avoid having to use banks, but in some instances, some things are unavoidable. Some things just need to be stored in a secure place, and a safety deposit box at a bank is meant to do just that. A modern approach is the use of a digital asset custodian.

Keeping your private key in a secure place is paramount in protecting your cryptocurrency. That being said, it’s important to let your most trusted advisors, estate trustee/liquidator or your beneficiaries know where they can find the private key upon your death; otherwise, your digital assets could be lost forever.

3 - Keep records of your transactions

According to the Canada Revenue Agency (CRA): “The CRA generally treats cryptocurrency like a commodity for purposes of the Income Tax Act. Any income from transactions involving cryptocurrency is generally treated as business income or as capital gain, depending on the circumstances. Similarly, if earnings qualify as business income or as a capital gain, then any losses are treated as business losses or capital losses.” (CRA, 2020)

Accordingly, you must keep records of your cryptocurrency transactions. According to the CRA [1], some important things to keep track of are:

  • the date of the transactions
  • the receipts of purchase or transfer of cryptocurrency
  • the value of the cryptocurrency in Canadian dollars at the time of the transaction
  • the digital wallet records and cryptocurrency addresses
  • a description of the transaction and the other party (even if it is just their cryptocurrency address)
  • the exchange records
  • accounting and legal costs
  • the software costs related to managing your tax affairs

Keeping clear records of your transactions will provide your accountant and estate Trustees/Liquidators with the necessary information to properly file your terminal tax return and substantiate the tax filing position.

Many aspects of our lives are purely digital – and as intangible as they seem (after all, you can’t physically hold this type of asset!) – they can be very valuable. So, it’s imperative to include the necessary language in your will to deal with crypto. Identify which beneficiaries will receive your crypto and leave proper instructions on where to locate your private keys and passwords.

At Richter, we know that effective will and estate planning is about much more than just making a decision and then writing down who gets what. By working closely with our clients and getting to know them, their families, their goals and their objectives, we help them craft a sound and inclusive plan. An advisor assists individuals in bringing to light any other issues or steps the individual or family may have to consider, such as incapacity mandates, family trusts, pre-mortem reorganization of family assets and companies, and of course, securing assets like cryptocurrencies or others not commonly thought about when drafting a will.

[1] CRA. “Guide for cryptocurrency users and tax professionals”.

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The views and opinions expressed in this article are those of the author and do not necessarily reflect the views or opinions of Olympia Trust Company, Olympia Financial Group Inc., or any of its affiliates. The author’s views and opinions are based upon information they consider reliable, but neither Olympia Trust Company, Olympia Financial Group Inc. nor any of its affiliates, warrant its completeness or accuracy, and it should not be relied upon as such.

Scott Binns
Partner, Richter LLP

With almost 20 years of experience in Canadian Tax, Scott Binns specializes in estate planning, providing high net-worth individuals and their families tailored services for their unique needs. He also consults on all aspects of corporate and personal tax planning and Canadian income tax compliance matters, including issues relating to trusts and partnerships. Scott is well-versed in both the blockchain and crypto-currency spaces and takes pride in being able to adapt and learn about all things emerging tech. He loves the start-up space and helping entrepreneurs create opportunities, build relationships and form strategic partnerships.