Bitcoin is unlike almost any other asset you might pass on. A share portfolio can be tracked down by a solicitor. A bank account can be frozen and eventually transferred through the courts. Bitcoin held in self-custody, with no living person who knows the seed phrase, is gone. No executor, no judge, and no exchange can retrieve it. That reality makes Bitcoin estate planning one of the most pressing things any holder should sort out, and most people haven't.
Why Bitcoin doesn't fit neatly into a standard will
A traditional will names beneficiaries and assets. It might say "I leave my investment portfolio to my children equally." A bank or broker receives the grant of probate, verifies the beneficiary's identity, and transfers the funds. The institution is the custodian. It holds the keys.
With Bitcoin, you are the custodian. Your private key controls the funds, not a company. If your executor doesn't receive the private key or seed phrase, the Bitcoin stays at that address indefinitely. The blockchain doesn't care about a will. It only responds to a valid signature.
This creates two practical problems. First, the asset must be disclosed in the will clearly enough that an executor knows it exists. Second, access must be passed on securely without exposing the funds to theft before or after death. Getting both right at the same time is harder than it sounds.
What the ATO expects from a deceased estate
The Australian Taxation Office treats Bitcoin as property, not currency. When Bitcoin is transferred from a deceased estate to a beneficiary, that transfer can trigger a capital gains tax event. The ATO's position is that the cost base of the Bitcoin resets to its market value at the date of death, which can work in the beneficiary's favour if the original holder bought at a low price years earlier.
Executors need to document the value of Bitcoin held at the date of death, which requires knowing what was held in the first place. If you're planning your estate, the starting point is a clear, private record of your holdings, including which wallets hold what, and what the access method is for each one. If you've been tracking this already for tax purposes, you're ahead. If you haven't, Bitcoin cost basis tracking is the foundation on which estate documentation is built.
How to include Bitcoin in your will without giving the game away
Your will is a public document after probate. Putting your seed phrase in a will is one of the worst mistakes a Bitcoin holder can make. Once the will is filed with the court, anyone can read it. The seed phrase should never appear in the will itself.
What belongs in the will is a clear description of the asset and a reference to where access instructions can be found. Something like: "I hold Bitcoin in self-custody. Access instructions are contained in a sealed letter held by [law firm name], to be provided to the executor upon my death." The letter itself is not filed publicly.
Some holders use a solicitor to hold a sealed envelope. Others use a fireproof safe at home, with the combination provided to a trusted person separately from the safe's location. The goal is a system where no single person has both the location and the access, until the moment it's needed.
The sealed letter approach in practice
A sealed letter held by a solicitor is one of the most practical options for Australian holders. The letter contains the seed phrase or the location of the seed phrase backup, written clearly enough for a non-technical executor to act on. It should include:
- The type of wallet used (hardware, software, or paper)
- The wallet software name and version if relevant
- Step-by-step instructions for recovery
- The derivation path, if the executor will need to use an unfamiliar wallet app to access the funds
Update the letter any time you change wallets, move funds, or alter your setup. A letter written in 2022 describing a wallet you no longer use is worse than no letter at all. It creates false confidence and sends an executor on a dead-end search.
What couples need to think about separately
Joint planning is more complicated than solo planning. One partner often holds the Bitcoin while the other has little technical knowledge. If the holder dies first, the surviving partner needs to be able to access the funds immediately and reliably, not after a six-month legal process. The estate planning for couples holding Bitcoin deserves its own conversation, and the specific risks around Bitcoin inheritance planning for couples are worth working through before you assume a standard will covers it.
The basic principle is that a surviving spouse should not need a solicitor to access Bitcoin they need for living expenses. That means practicing the recovery process while both partners are alive, not leaving it as a theory in a sealed envelope.
Executor selection matters more than most people realise
An executor handling a Bitcoin estate needs to be willing to learn the basics of self-custody and recovery. They don't need to be a developer, but they need to understand that Bitcoin is not like a bank account and that mistakes in the recovery process can be permanent. Sending Bitcoin to the wrong address during an estate settlement cannot be undone.
If your preferred executor is not technically confident, consider naming a professional executor alongside a trusted friend who can handle the Bitcoin component specifically. The will can delegate specific tasks, including the management of digital assets, to a named individual.
The tax interaction with inheritance planning
If you've held Bitcoin long enough to qualify for the 12-month CGT discount, that discount doesn't automatically carry over to a beneficiary. The beneficiary inherits the asset with a cost base set at the date-of-death market value, and their own holding period starts from that date. Understanding the 12-month CGT discount rule is relevant not just for your own selling decisions but for advising beneficiaries on how long to hold before they sell.
Executors should also be aware that a deceased estate is a separate tax entity in Australia. It has its own tax file number and its own obligations. Bitcoin sold by an estate during the administration period is a CGT event for the estate, not for the beneficiary. Timing matters.
Start with documentation, not a solicitor
Most people put off Bitcoin estate planning because it feels like a legal project. It isn't, at first. It starts with a private document that lists what you hold, where it's held, and how to access it. That document is the foundation everything else is built on. A solicitor can draft the will. A trusted person can hold the sealed letter. But only you can write down exactly what you own and how the recovery works.
Get that document right, store it securely, and review it every time your Bitcoin setup changes. That single step puts you ahead of the overwhelming majority of holders who have given this no thought at all.