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Crypto Law/Level IX · Death, divorce and disputes/9.1 Inheritance/Lesson 1

Crypto lost at death

Why crypto can disappear when its holder dies, what courts and custodians can and cannot recover, and how tax and unclaimed-property rules still reach it.

Education, not legal, tax or investment advice. Crypto law differs between countries and states and changes often. Check the current rules where you live with a qualified lawyer or tax adviser before you act.

The lean path

The cheapest, lowest-tax, simplest and most private route the law allows, best first. Each step names the rule it rests on and the condition that keeps it lawful.

  1. Zero-cost first: write a map of every platform and wallet type, without secrets, so an executor can find holdings; tax and reporting still apply to coins found, and inaccessible ones still need an explanation to the tax authority.
  2. For custodial accounts, skip probate where the estate qualifies: California’s affidavit under Probate Code §13100 covers estates up to $208,850 for deaths on or after 1 April 2025; it needs no court filing but cannot be used until 40 days after death.
  3. Heirs owe no income tax on gains accrued before death: under 26 U.S.C. §1014 their basis is fair market value at death, and Form 706 is needed only above $15,000,000 for 2026 deaths; record the date-of-death value, because later gains are taxed.
  4. If an account was escheated, the owner’s heirs can claim it from the state without paying a finder: searching unclaimed property, including through MissingMoney.com, is free; the claim still requires proof of death and entitlement.
  5. UK estates: no inheritance tax is due below the £325,000 nil-rate band or on assets left to a spouse or civil partner; HMRC still expects date-of-death values, and an explanation on form IHT400 for crypto believed inaccessible.

MaterialsThe Ontario Securities Commission staff report ‘QuadrigaCX: A Review by Staff of the Ontario Securities Commission’ (June 2020)Coinbase’s help page ‘Claim a decedent’s Coinbase account’, as an example of an exchange’s estate processHMRC Cryptoassets Manual, page CRYPTO25000 (inheritance tax)26 U.S.C. §2054, the federal estate tax deduction for theft and casualty losses during estate settlement

Wonder

  1. If nobody can find the keys, does the estate still have to report the coins?
  2. What happens to an exchange account that no one claims after the owner dies?
  3. Was the QuadrigaCX money really lost because its founder died?

Explore

  1. Crypto can be lost at death in two different ways, and the law treats them differently. Coins held with a custodian, such as an exchange, sit in an account; the platform can hand them to whoever is legally entitled once it sees proof of death and legal authority. Coins in self-custody (lesson 4.1.5) are controlled only by a private key or recovery phrase. If that secret dies with the holder, no court, regulator or developer can move the coins, because the network recognises a valid signature, not a court order. The coins stay visible on the ledger and permanently unspendable.
  2. The best-known case is QuadrigaCX, a Canadian trading platform. On 14 January 2019 it announced that its co-founder and chief executive, Gerald Cotten, had died in India the previous month, and early reports said client crypto was locked in cold wallets only he could open. In June 2020, Ontario Securities Commission staff reported that over 76,000 clients were owed assets and lost at least C$169 million, and that most of the shortfall came from Cotten’s fraud, not lost keys: he traded against clients under aliases and ran the platform like a Ponzi scheme. ‘The keys died with him’ can hide other facts.
  3. For an exchange account the obstacle is paperwork, not cryptography. Coinbase’s help pages say it does not currently support naming a beneficiary for individual accounts, so the account passes under the will or the state’s intestacy law, and it asks for a death certificate and probate documents such as letters testamentary or a small-estate affidavit. If no one comes forward, state unclaimed-property law can take over. The 2016 Revised Uniform Unclaimed Property Act includes virtual currency in its definition of property, and in 2026 Alabama, Utah, Virginia and Maine enacted laws on the escheat of digital assets, generally delivered to the state in native form.
  4. Tax does not stop because access did. US federal estate tax reaches ‘all property to the extent of the interest therein of the decedent at the time of his death’ (26 U.S.C. §2033), and the Form 706 instructions list digital assets among the items reported on Schedule F. An executor who knows coins exist but cannot reach them still has to decide how to report and value them (lesson 9.1.5). Separately, §2054 allows a deduction for losses from theft or casualty incurred during the settlement of the estate and not compensated by insurance. Only estates above the filing threshold, $15,000,000 for deaths in 2026 (lesson 2.1.5), must file Form 706.
  5. The UK is more explicit. HMRC’s Cryptoassets Manual (CRYPTO25000) says cryptoassets form part of a person’s estate for inheritance tax in much the same way as bank accounts or shares, and the date-of-death value should be provided. It gives personal representatives a checklist: look for exchange accounts, payments to exchanges in bank and card statements, emails mentioning wallets, wallet apps on phones and computers, and recovery phrases in personal papers, and ask family and advisers. If cryptoassets are identified but believed inaccessible, HMRC asks for an explanation and the believed value in the additional information box of form IHT400.
  6. What heirs can force is limited. A court can order a custodian to disclose or transfer an account, but it cannot recreate a key; the Howells case in England (lesson 4.1.5) shows how little a court can do even when everyone agrees the coins exist. A practical check for any holder: write down which platforms and wallet types are used, without the secrets themselves (lesson 9.1.7), and ask whether a stranger holding that list, a death certificate and court papers could reach each holding. Any holding that fails the test is one that may be lost at death.

Key facts

  • QuadrigaCX announced on 14 January 2019 that its chief executive, Gerald Cotten, had died in India the previous month.
  • Ontario Securities Commission staff reported in June 2020 that QuadrigaCX clients lost at least C$169 million, mostly because of Cotten’s fraud rather than lost keys.
  • Coinbase’s help pages state that it does not currently support naming a beneficiary for individual accounts.
  • The 2016 Revised Uniform Unclaimed Property Act includes virtual currency in its definition of property.
  • 26 U.S.C. §2054 allows an estate tax deduction for theft and casualty losses incurred during the settlement of an estate and not compensated by insurance.
  • HMRC asks personal representatives who believe a deceased person’s cryptoassets are inaccessible to explain why, and give their believed value, on form IHT400.

Exercise nine, six, three, one

9CollectList up to 9 crypto holdings you or a person you know might hold (some lists are shorter), such as an exchange account, a hardware wallet, a phone wallet app, a staking position or tokens on a second network.
6ClusterSort them into 6 categories: custodial accounts with a named platform, self-custody wallets with a known backup, self-custody wallets with no known backup, holdings only one person knows about, holdings already documented for an executor, and holdings you are unsure about.
3DistillReduce the 6 categories to 3 groups: reachable by an executor with court papers, reachable only if a secret is found, and likely to be lost at death.
1CrystallizeWrite 1 sentence explaining, in your own words, why a court order can reach an exchange account but not a self-custody wallet whose recovery phrase is lost.

Fact check

Dates, figures and claims checked against the published sources listed below.

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