Bitcoin Inheritance: How Your Family Gets Your Coins
Passing on bitcoin without losing it: emergency letter, seed storage, multisig, will and inheritance tax in Germany, Switzerland and Austria explained.
Passing on bitcoin only works with a plan: your heirs need the seed phrase (and the passphrase, if there is one), instructions they can understand without you, and a trusted person who can help with the technical side. Your will states who gets the coins, never the key itself. Without a plan, bitcoin in self-custody are lost forever.
The problem: Bitcoin knows no certificate of inheritance
When someone dies with a bank account, the heirs present the Erbschein (certificate of inheritance) and the bank pays out. With bitcoin in self-custody there is nobody to present a certificate to. All that counts is who has the key.
It is the same property that protects your coins while you are alive: no bank can block them, no state can freeze them. On inheritance it becomes a trap. If the seed phrase and instructions are not ready, no court and no expert can help.
Nobody knows exactly how many bitcoin have already been lost this way. What is certain: every loss is final, and most could have been avoided with an hour of planning.
The three parts of a bitcoin inheritance plan
A good plan separates what anyone may read from what should only be found in an emergency.
| Part | What it contains | Who sees it | Where it is kept |
|---|---|---|---|
| Will | Who gets the bitcoin, possibly an executor | Probate court, all heirs | At home, with a notary or in official custody |
| Emergency letter | Which wallets exist, where the device and backups are, how to restore | Only the heirs, in an emergency | With your emergency documents |
| Keys | Seed phrase, passphrase, for multisig the wallet descriptor | Nobody, as long as you live | Separate from the letter, stored safely |
Whoever reads only the will cannot get to the coins. Whoever finds only the keys doesn't know whom they belong to or how to use them. Only together do they give access, and that is exactly how it should be.
Passing on bitcoin in five steps
- Write down your holdings. Which wallets exist (hardware wallet, app, multisig), on which exchanges you have accounts, and roughly how much is where. Don't forget old wallets and small accounts.
- Store the keys safely. The seed phrase on metal, in a place your heirs can reach in an emergency. The passphrase, if you use one, in a second place. How to do this is shown in the guide to storing bitcoin safely.
- Write the emergency letter. Instructions for someone without specialist knowledge (contents see below). It says where the keys are, not what the keys are.
- Add to your will. Who gets the bitcoin, and who should handle the settlement? One sentence is enough: "My bitcoin, as described in the emergency letter, go to …".
- Do a test run. Have the person who will inherit restore a wallet from a test seed themselves once, with a small amount. Whatever trips them up during the practice goes into the letter.
What goes into the emergency letter
Write as if it will be read by someone who has never opened a wallet. In a difficult time, without being able to ask you.
- One sentence up front: what bitcoin is, that the letter leads to real wealth, and that nobody may ever ask for the words.
- The overview: every wallet with type and model, approximate amount, every exchange account with name and email address.
- The locations: where the hardware wallet is, where the seed is, where the passphrase is. For multisig: where each key and the wallet descriptor are.
- The instructions: which wallet software to install, how to enter the seed, which settings matter.
- The trusted person: someone who knows bitcoin and will help without having access themselves.
- The warning: no "recovery services" from the internet, never enter the words on websites, don't rush anything. The coins won't run away.
The trusted person is valuable, but should never have both the keys and the letter. Otherwise your wealth depends solely on their honesty.
Where the keys are kept: the options compared
The basic question when passing on bitcoin is: how do your heirs get the keys without anyone else being able to during your lifetime? There are five common ways.
| Solution | Effort | Risk during your lifetime | Risk for the heirs | Suits |
|---|---|---|---|---|
| Seed in a safe deposit box or safe, letter at home | Low | Whoever finds both has access | Low, if the letter is understandable | Most holders |
| Shamir backup (e.g. 2 of 3 shares) | Medium | A single share reveals nothing | Medium, shares must be brought together | Families with several trusted people |
| Multisig 2 of 3 | High | No single person can access alone | Medium, wallet descriptor needed | Large holdings |
| Wallet with a timelock | High | Low, the inheritance key only works after expiry | Low, if set up and maintained | Technically savvy holders |
| Exchange or ETP | Very low | Bankruptcy, hack, account freeze | Low, a certificate of inheritance is enough | Small amounts, convenience |
Seed in a safe deposit box or safe
The simplest solution: the seed on metal is in a bank safe deposit box or a safe, the letter with your documents. After your death the heirs get access to the box with a certificate of inheritance or the opened will. It is quicker with a power of attorney that extends beyond death for a person you trust.
In Germany, the bank reports a safe deposit box to the tax office after death. That is not a problem as long as the bitcoin are in the inheritance tax return anyway. A passphrase then does not belong in the same box.
Splitting the seed: but properly
Never cut the 24 words into two halves for two people. Each half reveals so much to an attacker that they can brute-force the rest, and if one half is missing, everything is lost.
The right way is a Shamir backup (standard SLIP-39), which some hardware wallets offer. It creates, for example, three shares, of which two are enough. One alone reveals nothing. You can keep one share yourself, give one to your partner and one to a notary or family member.
Multisig: the professional solution for large holdings
With a 2-of-3 multisig wallet, every payment needs two of three keys. A typical split for inheritance: you hold one key, your heir one, a trusted person or a specialised service provider one. During your lifetime none of the others can move anything alone; on inheritance two are enough.
The wallet descriptor (also called the descriptor or configuration file) is crucial. It records which keys belong together. Without it the wallet cannot be restored, even with all the seeds. Keep a copy with each key.
Timelock: the built-in inheritance key
Bitcoin can secure coins so that a second key only becomes valid after a certain time without movement. Wallets such as Liana use this for inheritance: you give your heir a recovery key that only starts working after, for example, one year.
As long as you live, you regularly move the coins to yourself, which resets the clock. If you forget, the heir can access them even during your lifetime. This solution is elegant but requires discipline and a good understanding of the software.
How the timelock works technically
Every bitcoin address has a script that determines who may spend. A timelock script has two paths: path 1, your own key, is valid immediately. Path 2, the heir's key, only becomes valid once a certain number of blocks have passed since the coins were received (relative timelock, opcode OP_CHECKSEQUENCEVERIFY, BIP112).
On average 144 blocks are created per day. One year is about 52’560 blocks. The largest relative timelock is 65’535 blocks, about 15 months.
The clock restarts for each coin as soon as it goes into a new transaction. That is why you have to send the coins to yourself before it expires.
Exchange or ETP: simple, but with someone else's risk
Bitcoin on an exchange or as an ETP in a securities account are inherited like a bank account: the heirs come forward with a death certificate and certificate of inheritance, and the provider transfers the holdings. That is convenient but brings all the risks of a custodian. What happens when an exchange fails is shown by the exchange collapses from Mt. Gox to FTX. The difference between an ETP and real bitcoin is explained in the guide to buying bitcoin.
The will: what goes in and what doesn't
Legally, bitcoin are part of the estate like any other asset. In Germany everything passes automatically to the heirs on death (§ 1922 BGB, the German Civil Code), digital accounts included; the Federal Court of Justice confirmed this in 2018. Without a will, the statutory order of succession applies.
What goes in the will:
- who gets your bitcoin, as a whole or as a share
- a note that an emergency letter exists, without its contents
- possibly an executor (in Switzerland: Willensvollstrecker) who knows about bitcoin
What does not go in the will: the seed phrase, the passphrase or a PIN. After death the will is opened by the probate court, and all statutory heirs, including disinherited ones, learn its contents. Whoever finds the seed has the coins.
A handwritten will must be written entirely by hand and signed, in Germany, Austria and Switzerland alike; in Switzerland it must also be dated. Children and spouses have a compulsory share in all three countries that you can't simply get around.
Inheritance tax on bitcoin in DE, CH and AT
Tax isn't the core of this article, but it belongs in the plan. Your heirs have to pay it in euros or francs, even if they want to keep the bitcoin. As of 2026.
| Country | Inheritance tax | What applies to bitcoin |
|---|---|---|
| Germany | Yes, with allowances: spouse €500’000, children €400’000, grandchildren €200’000 | The value on the date of death counts. The heirs take over your purchase date: if you held for more than a year, a later sale is free of income tax. |
| Switzerland | Cantonal. Spouses exempt everywhere, children in almost all cantons; Schwyz levies no inheritance tax | Bitcoin go into the official tax inventory. A later sale from private assets stays tax-free. |
| Austria | No inheritance tax since 2008 | The heirs generally take over the acquisition date and costs. Old holdings bought before Mar 1, 2021 stay tax-free. |
The German allowance sounds high. With holdings you keep for decades, it can still get tight.
How the inheritance tax in the example is calculated
Tax class I (children), § 19 ErbStG (German Inheritance Tax Act): taxable acquisition up to €75’000 7%, up to €300’000 11%, up to €600’000 15%. The rate applies to the whole taxable amount, not in steps.
- Power Law line on Jan 1, 2036: 10^−16.493 × 9’859^5.688 ≈ $1’675’000 ≈ €1’511’300 (€1 = $1.1081)
- Floor on Jan 1, 2036: 0.42 × €1’511’300 ≈ €634’700
- Top band on Jan 1, 2036: floor × e^(3.56 ÷ (1 + (9’859 ÷ 4692)³)) = €634’700 × 1.414 ≈ €897’700
- Trend on Jan 1, 2036: the lower of the line and √(floor × top band) = √(€634’700 × €897’700) ≈ €754’800, 0.5 BTC ≈ €377’400, below the allowance
- Trend on Jan 1, 2037 (10’225 days), calculated the same way: ≈ €913’700, 0.5 BTC ≈ €456’800
- minus allowance €400’000 = €56’800 taxable
- €56’800 × 7% ≈ €3’976
Floor on Jan 1, 2036: 0.5 BTC × €634’700 ≈ €317’400, below the allowance.
Work out for yourself what your holdings could be worth in a few years according to the model:
Where the price stands relative to the trend today is shown on the Power Law page. What gifts during your lifetime do for tax, with tax rates, reporting duties and worked examples, is shown in Gifting bitcoin: tax and allowances. Whether they make sense for you belongs in a conversation with a tax adviser.
The most common mistakes when passing on bitcoin
- Nobody knows the bitcoin exist. The most common and most expensive gap.
- Seed in the will. A document that many people read is not a hiding place.
- Passphrase only in your head. Then access dies with you.
- Seed cut in half. Unsafe during your lifetime and risky for the heirs; Shamir or multisig is better.
- Multisig without a wallet descriptor. All seeds present, still no access.
- Too complicated. A setup that only you understand is a puzzle without a solution for your family.
- Never practised, never updated. A plan from five years ago often leads to devices and accounts that no longer exist.
How to raise the subject with the people it affects is in the article How to talk to your partner and family about Bitcoin. You practise keys, backups and recovery step by step in the Academy, stage 2: understand and secure.
Frequently asked questions
Can you inherit bitcoin?
Yes. Legally, bitcoin are part of the estate like money or shares. Whether your heirs actually get them, however, depends solely on whether they find the seed phrase and instructions. Without this information, bitcoin in self-custody are permanently lost, even if the inheritance is legally clear.
What happens to my bitcoin if I die and nobody has the seed?
They stay in the blockchain forever, but nobody can ever move them. No court, no authority and no manufacturer can recover them. If they are on an exchange, on the other hand, the heirs get the holdings with a certificate of inheritance and a death certificate.
Does the seed phrase belong in the will?
No. A will is opened by the probate court, and everyone involved receives its contents. The will should state who gets the bitcoin and point to the emergency letter. The seed is kept separately, in a safe place described in the letter.
Do you have to pay tax on inherited bitcoin?
In Germany, inheritance tax is due as soon as the value on the date of death exceeds the allowance, €400’000 for children. A later sale is tax-free if you had already held the coins for more than a year. Austria has no inheritance tax, and in Switzerland spouses are exempt everywhere and children in almost all cantons (as of 2026).
How can heirs access a hardware wallet?
With the seed phrase and, if set up, the passphrase. They enter the words into a new or the old hardware wallet and have access again. They don't need the PIN for that. Without the seed, the device is no help either, because it wipes itself after a few wrong PIN attempts.
What is better for inheritance, multisig or a simple seed?
For most holders, a well-stored seed with a clear emergency letter is enough. Multisig pays off for large holdings: no single key is enough, and one may be lost. In return, recovery is more demanding and needs the wallet descriptor.
Sources
- BIP39: Seed-Phrase und Passphrase (seed phrase and passphrase)
- SLIP-39: Shamir's Secret-Sharing for Mnemonic Codes
- BIP112: CHECKSEQUENCEVERIFY (relatives Zeitschloss) (relative timelock)
- Liana: Bitcoin-Wallet mit zeitgesteuerter Wiederherstellung (bitcoin wallet with time-based recovery)
- § 1922 BGB: Gesamtrechtsnachfolge (universal succession) and § 2247 BGB: Eigenhändiges Testament (handwritten will)
- Bundesgerichtshof (German Federal Court of Justice), judgment of Jul 12, 2018, III ZR 183/17 (digital estate)
- Erbschaftsteuer- und Schenkungsteuergesetz: § 16 Freibeträge (Inheritance and Gift Tax Act: allowances) and § 19 Steuersätze (tax rates)
- § 23 EStG: Private Veräußerungsgeschäfte (private sales transactions)
- Schweizerisches Zivilgesetzbuch (ZGB): Erbrecht, Art. 457 ff. (Swiss Civil Code: law of succession)
- ESTV: Kryptowährungen, Arbeitspapier zur steuerlichen Behandlung (Swiss Federal Tax Administration: working paper on the tax treatment of cryptocurrencies)
- BMF Österreich: Steuerliche Behandlung von Kryptowährungen (Austrian Finance Ministry: tax treatment of cryptocurrencies)
- Europäische Zentralbank: Euro-Referenzkurse (European Central Bank: euro reference rates)
- bitcoin-powerlaw.com: methodology, Power Law formula and data
Not financial, legal or tax advice. Models are no guarantee.
The Bitcoin Power Law newsletter
An email when we publish a new article or calculator. Every issue has a one-click unsubscribe link.