Bitcoin as inheritance: what German heirs need to know about tax, valuation & wallet access
Bitcoin and other cryptocurrencies are treated under German inheritance law like any other economic asset — inheritance tax allowances apply, and the 1-year speculation period is carried over. The real problem is not tax but technical: without wallet access or seed phrase, the crypto assets are lost forever. This guide explains the tax mechanics, the valuation question on the date of death and the five most common heir mistakes that destroy millions.
Inheritance tax is calculated on the market value on the date of death — the closing price on a major crypto exchange (Coinbase, Kraken, Binance). On a later sale, you inherit the parents’ original acquisition cost and their holding period. If the parents held Bitcoin for more than 1 year, you can sell immediately tax-free — the speculation period does not restart.
Phase 1: first 4 weeks — inventory & wallet access
The biggest danger is not the tax office, but losing wallet access. Studies (Chainalysis) estimate that 3–4 million BTC are already permanently lost — many of them because of deceased owners.
- Obtain death certificate (5–10 originals) — crypto exchanges also require it for account transfer.
- Search hardware wallets: Ledger, Trezor, BitBox in desk, safe, bank deposit box. Never guess the PIN (self-destruct after 3 failed attempts).
- Find the seed phrase: 12 or 24 hand-written words — usually on a steel plate, card or paper. Never photograph or digitise the document until the transfer is complete.
- Identify exchange accounts: check the parents’ bank statements for SEPA transfers to Coinbase, Bitstamp, Kraken, Bitpanda, BSDEX — they often reveal where crypto is held.
- 2FA reset at exchanges: with death certificate + certificate of inheritance, most exchanges will reset 2FA and allow a payout to an heir account. Duration: 4–12 weeks.
Inheritance tax on crypto — the allowances apply
| Relationship | Allowance | Tax on €200,000 BTC |
|---|---|---|
| Spouse | €500,000 | €0 |
| Children | €400,000 | €0 |
| Grandchildren | €200,000 | €0 (just) |
| Parents (inheritance) | €100,000 | ~€7,000 (class I, 7 %) |
| Siblings, nieces, nephews | €20,000 | ~€27,000 (class II, 15 %) |
| Other (unmarried partner) | €20,000 | ~€54,000 (class III, 30 %) |
Important: the allowances apply to the entire inheritance — not per asset class. Anyone inheriting €300,000 BTC plus €200,000 in property has a €500,000 inheritance → with children fully within the allowance (€400k per parent, two parents = €800k). Reporting within 3 months to the inheritance tax office is mandatory — even if no tax is due.
Example calculation: 5 BTC inherited, value €350,000
Mother bought 5 BTC in 2017 for a total of €25,000. She dies in 2026, BTC price on date of death: €70,000/BTC = €350,000 inheritance value. You are the only daughter, single.
Total tax burden from inheritance + sale: €0. Had the mother bought 5 BTC only in 2025 (8 months holding period at death), you would have paid the personal income tax rate on the full gain at sale — up to 45 % or about €146,000. Holding period decides everything.
Wallet access: the five most common mistakes
- Stamp the seed phrase on a steel plate, in a bank deposit box + second copy with notary.
- Crypto inheritance letter filed with the notary — describes wallet addresses, hardware wallet locations, exchange accounts (NOT the seed phrase itself).
- Brief a person of trust: at least 1 person must know that crypto exists and where to find it.
- Multisig wallet (2-of-3) for larger amounts: testator + 2 heirs each hold one key.
- Seed phrase stored in the cloud / email — hacker risk and no clear chain of inheritance.
- Guessing the PIN on a hardware wallet — after 3 failed attempts, self-wipe, everything gone.
- Forgetting inheritance tax reporting: even if €0 tax, reporting is mandatory within 3 months — otherwise tax evasion proceedings.
- Crypto acquisition cost not documented: if the parents had no purchase receipts, the tax office sets the cost at €0 — full gain taxable on sale.
- Selling immediately: anyone who does not check the 1-year period may give away 30–45 % in tax.
What to do with the inherited Bitcoin?
- Keep: if the parents held for more than 1 year and you believe in Bitcoin — you inherit a position with a low acquisition cost and the 1-year period already met. Hold without tax pressure.
- Sell immediately + diversify: for large amounts (> €50,000) reduce concentration risk — rebalance into a world ETF + bonds, tax-free if the 1-year period is met.
- Sell in tranches: if the speculation period is not met: monthly tranches, minimise the personal tax rate.
- Transfer to your own wallet: for security reasons, never leave it on the heir account at the same exchange — buy your own hardware wallet, self-custody BTC.
Frequently asked questions about Bitcoin inheritance
How is the Bitcoin value on the date of death determined?
Closing price on a major exchange (Coinbase, Kraken) on the date of death — usually converted to EUR. With extreme volatility (e.g. −30 % on a single day) the valuation date may feel fair or hit hard. Some tax advisors recommend taking the average across several exchanges. A written record of the date-of-death price (screenshot) is mandatory.
What if the parents’ acquisition cost is unknown?
Bad scenario. The tax office then often sets the acquisition cost at €0 — on sale, the full value is taxed as a gain. Solution: comb through the parents’ bank statements, exchange reports, email archives for crypto purchases. FIFO also applies: older coins are deemed sold first.
Does the 1-year period also apply to DeFi/staking?
Complex. For pure BTC/ETH without staking: yes, the 1-year period applies. With staking, lending or DeFi protocols, the period can extend to 10 years (BMF letter 2022). Mostly irrelevant in inheritance because the period runs with the testator — but ask a tax advisor.
What happens if the wallet is never found?
Crypto stays on the blockchain forever — nobody can access it. Tax-wise: anyone who can prove that the parents bought Bitcoin (e.g. via old exchange reports) but cannot find the wallet access can claim a loss with the tax office — it can be offset against other crypto gains. Disputes are likely.
Do we have to disclose the crypto addresses to the tax office?
As part of inheritance tax reporting, yes — value and valuation. Explicitly stating wallet addresses is not mandatory, but the tax office can ask during an audit. Recommendation: report cleanly documented, then the discussion is off the table.
What about crypto on a foreign exchange?
Where the exchange is based does not matter — as a German heir you pay tax in Germany according to the DTA. Important: some exchanges (Binance, KuCoin) require extensive KYC verification before heir payouts are released. Plan for 3–6 months for foreign exchange transfers.
Plan inherited crypto strategically
DCA simulator and tax optimisation calculator — see how staggered sales make optimal use of the savings allowance.
- Tax optimisation calculator for the savings allowance
- DCA simulator for a staggered sale plan
- Real return calculator with inflation adjustment