More and more people have cryptocurrencies, NFTs, online deposits, or digital access with considerable value. The legally compliant and tax-efficient integration of these digital assets into succession planning presents new challenges for both families and advisors.
Digital assets include:
- Cryptocurrencies such as Bitcoin, Ethereum, Solana
- Digital wallets with private keys and access data
- NFTs (non-fungible tokens), e.g., digital artwork
- Online accounts (e.g., PayPal balances, AirBnB payments)
- Domain names, websites, licenses
- Password-protected cloud archives and online contracts
Valuation and documentation in the event of inheritance
The market value on the date of death is decisive for inheritances and gifts. Volatile prices may require a calculation of the average value or documentation of the reference date. Wallets and access keys must be documented and attached to the estate inventory. As this is not always easy, auditable reports are ideal (e.g., CoinTracking, Blockexplorer, exchange statements).
Regardless of the tax assessment, however, there is a particular risk with digital assets in the event of total loss due to lack of access. Without a password or seed phrase, the assets are lost. Heirs may not have access, which in itself can mean a significant loss for the existing estate.
Digital assets in inheritance and gift tax law
There are currently no special regulations for digital assets – but there is an obligation to provide evidence to the tax office. Cryptocurrencies and NFTs are considered other assets under Section 12 (1) of the German Inheritance Tax Act (ErbStG). They are valued in accordance with Section 12 (3) of the German Inheritance Tax Act (BewG) at their fair market value.
The usual allowances (Section 16 of the German Inheritance Tax Act) also apply here, e.g., $400,000 for children.
Example:
A father gives his son 3 Bitcoin worth €180,000. In this case, and until the above-mentioned allowance for gifts within 10 years has been exhausted, no gift tax is payable – however, the transfer must still be reported and documented (Section 30 ErbStG).
So what should you do? Secure your digital legacy and plan your succession
First, you need to create a digital inventory of your digital assets, including wallet addresses, access codes/passwords, and storage locations, to ensure that your heirs have access to your digital assets. Ideally, this inventory should be deposited with a notary. In addition, clear testamentary provisions should be made for the inheritance of digital assets. These should be supplemented by a digital power of attorney.
Tax allowances can be used through gifts made during your lifetime. A transfer during your lifetime with usufruct is conceivable (e.g., for crypto interest) and reduces the taxable transfer value and thus gift and inheritance taxes, sometimes very significan
Combination with a foundation, limited partnership, or family pool
Digital assets can also be incorporated into higher-level succession solutions such as family companies, family pools (e.g., limited partnerships or limited liability companies), or private foundations, which optimizes asset transfer not only from a tax perspective but also from a family perspective and across generations.
Conclusion: Digital succession starts today
The early and structured integration of digital assets into succession planning is not a topic for the future, but already a reality. Clients should work with their tax and legal advisors to develop a strategy that is tailored to their individual needs. The first step is to create a digital estate inventory, evaluate the digital assets and classify them for tax purposes, but above all
include your digital assets in wills and powers of attorney.
Are you interested in legally compliant and tax-optimized succession planning for your digital assets? Contact us – we will be happy to advise you.
