Digital inheritance: management of cryptocurrencies and digital assets of the deceased

Hypothetical case study developed on the basis of our experience with families on international matters, intended to illustrate the type of operations that the Firm is able to structure and manage for clients with a similar profile; the scenario does not refer to a specific case actually handled.

A forty-five-year-old man dies suddenly, leaving to his wife and two children a well-defined traditional estate, but also a cryptocurrency portfolio with an estimated value of over 600,000 euros of which no one knows the access keys. Bitcoin on a hardware wallet locked in a safe, Ethereum on an exchange of which the family does not have the credentials, tokens on DeFi platforms of whose existence no one was even aware, an account on a trading platform that refuses access without the two-factor authentication of the deceased holder. Assets that exist but that no one can touch. And in the meantime the value fluctuates: what today is worth 600,000 euros in three months could be worth 400,000 or 800,000. To this are added non-financial digital assets: a web domain that generates advertising revenue, a library of digital content with non-transferable personal licences, social accounts with commercial value. Digital inheritance is the new frontier of successions: assets that do not physically exist, that are in no land registry and in no securities register, that can be unrecoverable if one does not act with technical and legal competence in a short time.

The case

A forty-five-year-old computer engineer, resident in Turin, deceased from a sudden heart attack. Married to a forty-two-year-old woman, a teacher, with two children aged fourteen and eleven. The traditional estate was clear and documented: an apartment owned (value 320,000 euros, with a residual mortgage of 80,000 euros), current accounts for about 90,000 euros, a supplementary pension fund, the car. The succession declaration on these assets presents no particular complexities.

The problem is all the rest. The man is an early adopter of the crypto world and a sophisticated digital investor. His wife knows vaguely that “he has some Bitcoin” but does not know the value, the location or the access methods. The children, minors, know nothing. After the death, the wife finds in her husband’s study:

A Ledger Nano X hardware wallet, protected by an unknown PIN, with a recovery seed phrase (24 words) handwritten on a sheet kept in the safe
A confirmation email of the opening of an account on an international exchange (Kraken), with a visible username but password and two-factor authentication not available
Fragmentary notes in a notebook with references to “staking ETH”, “liquidity pool”, “yield farming” and alphanumeric addresses incomprehensible to those who do not operate in the sector
A web domain with a high-traffic technology blog, monetised through Google AdSense, which generates revenue of about 1,500 euros per month
Accounts on digital content platforms (Amazon Kindle with dozens of purchased ebooks, Steam with a library of video games, subscriptions to professional software)
Social media profiles with a significant following in the tech sector (LinkedIn with 15,000 followers, Twitter/X with 8,000 followers)

The wife turns to our Firm in a state of understandable bewilderment: not only does she have no idea how to access these assets, but she does not even know whether she must declare them in the succession, how to value them, and what to do with assets that lose or gain value every day.

The challenge

Digital inheritance poses challenges that traditional inheritance law was not designed to address, because digital assets have characteristics radically different from physical ones: they are immaterial, often pseudonymous, protected by cryptography, subject to unilateral terms of service of the platforms, and in some cases technically unrecoverable if the access keys are lost.

Access to and recovery of the cryptocurrencies

The hardware wallet contains assets on the blockchain whose extent is unknown: without the PIN of the device or the recovery seed phrase, the funds are unrecoverable. The sheet with the 24 words found in the safe is potentially the key to accessing everything, but an error in the recovery procedure (incorrect entry, wrong order of the words, use on a compromised device) can irreversibly compromise the access
The Kraken exchange, as a regulated platform, provides for an access procedure for the heirs of the deceased holder, but requires specific documentation: death certificate, proof of the status of heir, court order in some jurisdictions. The procedure has its own timing and is not guaranteed, especially for assets held in custodial wallets of the platform
The notes on staking and liquidity pools indicate the possible presence of funds locked in DeFi (decentralised finance) protocols: assets that are not held by any centralised platform but are managed by smart contracts on the blockchain, accessible only with the private keys of the holder. Their identification and recovery require specialist technical skills

Legal qualification and declaration obligations

Cryptocurrencies are qualified by the Italian legal system as “crypto-assets” pursuant to the Legge di Bilancio 2023 (L. 197/2022, paragraphs 126-147) and are subject to specific tax obligations: declaration in the quadro RW for monitoring purposes, stamp duty of 0.2% on the value, taxation of capital gains at 26%
For inheritance purposes, crypto-assets with economic value enter the estate and, where the conditions apply and the relevant exemptions are exceeded, are also relevant for the purposes of inheritance tax. The most delicate issue does not concern so much the reference moment for the valuation, which, in general, coincides with the date of the opening of the succession, normally corresponding to the death, but rather the concrete determination of their market value, made more complex by the high volatility of these assets and by the difficulties of reconstruction and documentation.
The deceased’s quadro RW may not have been completed correctly in previous years: a possible post-mortem regularisation would lead to penalties charged to the heirs that must be assessed and, if possible, managed through the ravvedimento operoso
The funds in DeFi protocols present a further declaration complexity: they are not held on platforms identifiable with an intermediary, but on pseudonymous smart contracts, and their indication in the quadro RW requires a specific analysis

Non-financial digital assets

The web domain with the monetised blog is a productive asset: it generates 1,500 euros per month and has an autonomous value as digital property. But the domain is registered in the name of the deceased, the Google AdSense account is personal and non-transferable according to the standard terms of service, and the intellectual property of the published content must be reconstructed
Digital licences (Kindle ebooks, Steam games, software) are generally personal non-transferable licences according to the terms of service of the platforms: they do not form part of the estate in the traditional sense, but represent an economic value that the heirs lose upon the death of the holder
Social media profiles with a significant following have a commercial value (partnerships, sponsorships) but are subject to the terms of service of each platform: some allow the memorialisation of the account, others its closure, few its transfer

The solution

The Firm would coordinate an intervention that could combine legal inheritance competences with specific technical competences in the crypto and digital assets sector, operating on three parallel fronts: the recovery of the assets, their legal and tax qualification, and their integration into the succession declaration.

1. Recovery and securing of the cryptocurrencies

Engagement of a technical consultant specialised in digital forensics and crypto recovery, operating under the legal supervision of the Firm and bound by a confidentiality agreement: the seed phrase is information that, if disclosed, would expose the funds to the risk of theft
Use of the seed phrase to recover access to the hardware wallet in a secure environment (offline computer, verified procedure): the wallet contains 4.2 Bitcoin and 12 Ethereum, for an overall value at the time of recovery of about 380,000 euros
On-chain analysis of the blockchain addresses associated with the wallet: identification of further funds in staking on a DeFi protocol (32 Ethereum in staking on Lido, for a value of about 85,000 euros) and of a position in a liquidity pool (estimated value about 45,000 euros)
Recovery of access to the Kraken account through the platform’s succession procedure: presentation of the death certificate, of the affidavit of the heirs and of a Court order authorising the heirs to access. The account contains about 95,000 euros between cryptocurrencies and fiat currency
Transfer of all the recovered crypto-assets to a single new hardware wallet, kept in a safe with the seed phrase entrusted to the notary in a sealed envelope, pending the heirs’ decisions on liquidation or retention
Overall value of the recovered cryptocurrencies: about 605,000 euros at the time of securing

2. Management of the non-financial digital assets

Web domain and blog: transfer of the ownership of the domain to the heirs through the registrar’s procedure, transfer of the Google AdSense account by means of a specific request to Google with succession documentation, analysis of the intellectual property of the content (works of the intellect of the deceased, transferable to the heirs by succession). The blog continues to generate revenue throughout the entire process
Economic valuation of the domain and the blog as a productive asset: appraisal based on monthly revenue, traffic, domain authority and market comparables for sales of similar sites. Estimated value: 35,000-45,000 euros
Social media accounts: request for memorialisation of the Facebook account, assessment of the options for LinkedIn (retention as a memorial profile or closure), analysis of the terms of service of each platform for the transfer or closure
Digital licences: cataloguing of the assets (ebooks, games, software) and verification of the terms of service of each platform. In most cases, the assets are not transferable but the active subscriptions were cancelled to avoid future charges

3. Tax qualification and succession declaration

Valuation of the crypto-assets for the purposes of the succession declaration, on the basis of the market value at the date of the opening of the succession (normally coinciding with the death), with documentary reconstruction of the value by means of evidence taken from the exchanges or the platforms used and, where appropriate, supported by a technical report.
Inclusion of the crypto-assets in the estate, with verification of the possible application of inheritance tax according to the ordinary rates (4% for spouse and children with an exemption of 1 million euros each). In the specific case, the distribution of the estate among the heirs is fully covered by the exemptions provided for by the legislation.
Analysis of the tax position of the de cuius in previous years, with verification of the declaration obligations relating to the crypto-assets and the tax monitoring obligations. The examination of the documentation highlights omissions relating to two tax years, for which the preparation of the supplementary declarations and the regularisation by means of ravvedimento operoso are carried out.
Entry of the digital assets in the succession declaration according to their correct classification in the electronic form, with preparation of the technical documentation useful to identify the consistency, availability and valuation criteria of the assets, including the information relating to the platforms used and the connected blockchain addresses.

4. Heirs’ decisions on the management of the assets

Presentation to the wife of three options for the management of the cryptocurrencies: immediate liquidation (certainty of the value but renunciation of the potential rise), full retention (exposure to volatility), partial liquidation (conversion of 60% into euros and retention of 40% in Bitcoin and Ethereum)
The wife, after consultation, opts for partial liquidation: conversion of about 360,000 euros and retention of a position in Bitcoin and Ethereum for about 245,000 euros, transferred to a hardware wallet kept with the supervision of the technical consultant
For the blog: decision to keep it operational by entrusting the management of the content to a freelance collaborator identified in the deceased’s community, preserving the monthly revenue as income for the family
Preparation of a tax monitoring plan for the following years: completion of the quadro RW for the retained crypto-assets, declaration of any capital gains in the event of future liquidation, declaration of the AdSense income

The result

The intervention would unfold over a period of about five months, from the initial consultation to the closing of the succession declaration inclusive of all the digital assets identified.

Full recovery of crypto-assets for an overall value of about EUR 605,000, without dispersion of funds in the phases of access, reconstruction and transfer of the assets.
Recovery of funds held on exchanges for about EUR 95,000, by means of the management of the succession procedure provided for by the platform and coordination between Italian succession documentation and the requirements requested by the foreign intermediary.
Identification and recovery of assets held in DeFi protocols for about EUR 130,000, which emerged through on-chain analysis and technical reconstruction of the digital holdings of the de cuius.
Transfer to the heirs of a monetised blog and maintenance of its operability, with the preservation of recurring revenue of about EUR 1,500 per month and with an estimate of the value of the asset between EUR 35,000 and EUR 45,000.
Regularisation of the tax position of the de cuius, by means of the preparation of the necessary supplementary formalities and recourse to the ravvedimento operoso, with containment of the penalty risk compared to possible subsequent disputes.
Submission of the succession declaration with the inclusion of all the digital assets identified, correctly reconstructed, valued and treated for declaration purposes.
Setting up of a management plan following the succession, inclusive of secure custody of the hardware wallets, organisation of the tax monitoring formalities and continuity in the management of the productive digital asset.

The legal support would allow the family to recover and secure a significant component of the inheritance estate, which, in the absence of timely documentary, technical and legal reconstruction, would risk remaining unidentified or not concretely accessible.

What clients tell us in similar cases

“My husband used to talk to me now and then about Bitcoin, but for me it was an incomprehensible world. When he passed away, I found this gadget in the safe, a notebook with notes that looked like codes, and a sheet with twenty-four words. I didn’t even know where to start. The notary told me that for the succession it was necessary to know what there was and how much it was worth, but he had no idea how to find out. My accountant even less. The Firm brought a technician who understood in two days what there was and where, and then handled the entire recovery with a care that took an enormous weight off me. The thing that stunned me was discovering that there was money also on these decentralised platforms I had never heard of: one hundred and thirty thousand euros that without that technical analysis would have disappeared. Today I have sold a part, I have kept a part, my husband’s blog continues to work and generate revenue. And I have learnt that when someone in the family invests in crypto, the access keys must be accessible also to the others. This is the lesson I would like to pass on to everyone.”

Duration and team

The intervention could reasonably conclude in about five months from the initial consultation, with the following involvement:

Lawyer specialised in inheritance law, for the management of the succession, the legal qualification of the digital assets, the coordination with the notary and the succession declaration inclusive of crypto-assets
Technical consultant in digital forensics and crypto recovery, for the recovery of access to the hardware wallet, the on-chain analysis, the identification of the DeFi funds and the securing of the assets
Tax advice specialised in crypto-assets, for the valuation for succession purposes, the regularisation of the previous positions with ravvedimento operoso, the quadro RW and the monitoring plan
Appraiser for the valuation of the web domain, for the economic estimate of the blog as a productive asset
Notary, for the succession declaration and the custody of the seed phrase in a sealed envelope

The direction of the case would be entrusted to a single point of reference, responsible for the coordination between legal and technical competences and for the constant updating of the client on an estate whose value changed daily.

Do you have a similar case?

If you are facing a succession that includes cryptocurrencies, digital assets or online estate, or if you want to plan the transmission of your digital assets to your heirs, it is essential to rely on a professional who knows how to:

coordinate the technical recovery of the cryptocurrencies (hardware wallet, exchange, DeFi protocols) with the legal competences necessary for the succession
identify digital assets that the heirs might not know about, through on-chain analysis and the reconstruction of the deceased’s digital activity
qualify and value the crypto-assets for the purposes of the succession declaration, in compliance with the tax legislation in force
manage the regularisation of any previous tax positions of the deceased relating to the crypto-assets
assist the heirs in the decisions on the management of the inherited digital assets: liquidation, retention, operational management of the productive digital assets
and above all, if it is you who hold cryptocurrencies: structure a transmission plan that guarantees your heirs access to your digital assets without the risk of loss

Our Firm is among the few to combine inheritance competence with a network of technical consultants specialised in crypto recovery and digital forensics. In an era in which a growing share of assets is digital, inheritance can no longer be managed only with traditional instruments.

Please contact us for a confidential preliminary assessment

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