Deceased Estates and Cryptocurrency Holdings

1. Establish Ownership and Authority

Before anything is moved, four separate questions need to be answered: who owned the holding legally or beneficially; who has authority to administer the estate; whether the provider holding the asset will recognise that authority; and who, technically, can control the wallet. They frequently have different answers.

Not every holding that appears to be the deceased's is estate property. Crypto acquired through a company or trust, held jointly, held on behalf of another person, or connected with a business the deceased ran with others must be characterised before it is treated as an estate asset. Equally, on-chain visibility does not establish legal ownership or control of an address — the same point we make in our companion article on cryptocurrency and divorce in Australia.

Authority to administer comes from the will and, where required, a grant. Not every estate needs a grant of probate or letters of administration, but an exchange, custodian or other asset holder may require one before it will deal with the personal representative. For the grant process, see our guides on probate in Victoria and letters of administration in Victoria, and on the duties of an executor.

2. Identify and Preserve the Asset Lawfully

Being named executor does not create an unlimited right to access every digital account, and it does not authorise the use of the deceased's credentials. The lawful starting points are:

• Secure the physical items. Devices, hardware wallets, papers, notebooks, metal backup plates, safe and safe-deposit contents — secured intact, with a record of where each item was found.
• Review what the estate may lawfully review. Bank and card statements showing transfers to or from exchanges; tax returns and the accountant's working papers; correspondence and records the personal representative is entitled to obtain; and information volunteered by family, business associates or advisers.
• Approach each provider on its own terms. Exchanges and custodians publish their own deceased-estate, identification, privacy and jurisdictional requirements. Contact them through independently verified channels and follow the process they set.

An executor should not impersonate the deceased, attempt to defeat two-factor authentication, use passwords or read communications contrary to law or a provider's terms, access another person's account, or move assets before ownership, authority and custody arrangements are settled. Nor should anyone experiment with a recovery phrase, wallet or device without a secure, properly designed process — an unauthorised or mistaken transfer is often extremely difficult, and sometimes impossible, to reverse or recover.

3. Distinguish Custodial Holdings From Self-Custody

Blockchain records are decentralised, but a great deal of crypto is held through centralised exchanges and other custodians. The practical categories are:

• Custodial holdings. An exchange, broker or custody provider controls the underlying keys. What the estate holds is a claim defined by the provider's terms and the applicable law — which may be contractual, or may involve a trust or another proprietary interest. Access for the estate depends on the provider's evidence requirements rather than on a credential.
• Self-custody software wallets. Keys held on a phone, computer or browser extension, protected by a password or PIN and ordinarily backed up by a recovery phrase.
• Self-custody hardware and offline backups. Hardware wallets and written or metal backups. Cold-storage arrangements are designed to keep private keys offline or isolated from general-purpose computers, but the protection they actually provide depends on the device, how it was set up and how it has been used.
• Protocol and DeFi positions. Assets lent, staked, locked or supplied to a liquidity pool. Access ordinarily depends on control of the relevant address and credentials rather than on the original physical device or software installation, but protocol rules, smart-contract terms, lock-up and unbonding periods and recovery constraints vary and need to be checked position by position.

A recovery phrase is not literally the wallet. It is a backup from which the wallet's private keys and addresses may be derived or restored in compatible software or hardware. It is an extremely sensitive control credential, and it should be treated as one.

4. Obtain Specialist Assistance Where It Is Justified

Legal advice will usually be important where crypto is a material part of an estate. Forensic accounting, blockchain analysis or specialist tax input may also be appropriate, depending on the value, the complexity of the holdings, whether ownership or custody is disputed, and what the estate proposes to do with the asset. Ordinary financial records — exchange statements, bank records and tax material — should ordinarily be considered first, though early specialist help can be justified where the value, urgency or risk of loss warrants it.

5. Value and Document the Holding

Record an Australian dollar value at the date of death for each holding, together with the source, the exact time and the methodology used. Prices move continuously and can differ between venues; thinly traded tokens, locked positions and stablecoins may need separate treatment, and genuinely illiquid holdings may require specialist evidence. Values will also be needed at the date of any disposal.

The estate's records should identify, for each holding: the token, the network, the wallet address or account, the quantity, the valuation and its source, the cost base and acquisition evidence so far as it can be reconstructed, and every transaction made during administration. Reputable crypto-tax and portfolio tools can help assemble transaction histories, and should be selected on their suitability for the estate rather than on marketing claims.

6. Decide Whether to Retain, Sell or Distribute

The decision is governed by the will or the intestacy rules, the personal representative's powers and duties, the debts, tax and expenses to be met, any claims on foot, and the circumstances of the holding — not by beneficiary preference alone. Crypto's volatility makes the decision uncomfortable, because a price movement either way invites criticism, but the answer is a properly advised and documented decision rather than an attempt to predict the market.

Consulting beneficiaries and recording informed written agreement can reduce disputes and is often sensible. It does not, however, displace the will, the legislation or the personal representative's duties, and it does not automatically protect them from liability. Agreement may be impossible or insufficient where there are minors, persons under disability, unascertained beneficiaries, unresolved claims or unpaid liabilities. For the beneficiary's perspective, see beneficiary rights in estate administration.

Where a decision is genuinely difficult, advice should be taken about the court applications that may be available. Section 63 of the Trustee Act 1958 (Vic) is a power to authorise a particular transaction that is expedient but otherwise beyond the trustee's powers, where the statutory conditions are met; it is not a general directions jurisdiction. The Supreme Court may also give advice or directions under its separate jurisdiction. Whether relief is available, what protection it gives and how the costs of the application are borne all depend on the application and the circumstances, and none of that can be assumed.

7. Tax: Division 128, Disposals and Income

Crypto is a CGT asset. Division 128 of the Income Tax Assessment Act 1997 (Cth) governs the effect of death and transmission, subject to that Division's own conditions and exceptions. In outline:

• No automatic date-of-death cost base. For an ordinary post-CGT asset, the legal personal representative or beneficiary generally takes the deceased's cost base. There is no automatic uplift to market value at death.
• Market value applies in specified cases. Market value at the date of death applies in the circumstances the legislation identifies, including generally where the deceased acquired the asset before 20 September 1985.
• Date-of-death value still matters. Even where it is not the tax cost base, the date-of-death value is used for the inventory, accounting, administration and dealings with beneficiaries.
• Dealings during administration. A sale, or an exchange of one crypto asset for another, may cause a CGT event during administration even though no cash is received.
• Transmission is not one rule. A transfer to a beneficiary under a will or on intestacy, a transfer to a non-resident beneficiary, and a transfer to a tax-advantaged entity are treated differently under Division 128 and should not be collapsed into a single proposition.
• Discount and reporting. Whether the CGT discount is available, and who reports a transaction, depend on the particular asset, taxpayer, holding period, residency and dealing.

Separately from CGT, crypto activity can produce ordinary income — staking rewards, lending or protocol yield, and mining proceeds are common examples. Income derived before death and income derived by the estate during administration are reported differently, and network fees, exchange charges and transaction costs need to be captured in the records because they can affect the calculation. This is an area for specific advice on the estate's facts. For the general framework, see capital gains tax in deceased estates and when a deceased estate ends for tax purposes.

8. Transfer, Custody Handover and Records

Whether the holding is sold or transmitted, the mechanics need to be planned. Orders, agreements and distribution records should identify the token, the quantity, the network and, where relevant, the contract address; the receiving account or wallet, without any secret being disclosed; the valuation source and time; and who bears network fees, exchange charges and price movement between agreement and completion. Verify the receiving address independently, consider a small test transaction where appropriate, and confirm receipt in writing.

Custody of credentials during administration should be handled on risk-based principles rather than a fixed formula:

• Minimise the number of people exposed to a credential and avoid uncontrolled duplication.
• Protect against theft, loss, fire and incapacity, and document who holds what without recording any secret in the estate file, correspondence or court material.
• Consider properly assessed multi-authorisation arrangements or professional custody where the value justifies it.
• Preserve evidence of balances and transaction history before making any change.

Records and credentials must be treated separately. Estate, valuation, transaction and tax records may be subject to retention requirements and should be kept accordingly. Live control credentials are different: once an asset has been transferred or distributed, continuing to hold the credential that controls it creates security and authority risks. Credential custody should therefore be resolved when the asset is distributed or the administration ends, consistently with who now owns the asset, how the transfer was effected, the advice obtained, and an auditable handover.

A recovery phrase should never be disclosed in a will, an email, an ordinary cloud note, a photograph, a court document, or on an unverified website or application. Legitimate restoration of a wallet may involve entering a recovery phrase into verified software or a hardware device under a secure, controlled and preferably offline process — the point is that the process, the device and the software must be trustworthy, not that no legitimate process ever involves the phrase.

Fraud and Reporting

Estates attract fraud. Common patterns include "recovery service" approaches to the bereaved, phishing that imitates exchanges or estate-claim portals, and social engineering of family members. Treat unsolicited contact about the estate's crypto as suspicious and verify independently. Suspected scams can be reported to Scamwatch, and cybercrime can be reported to police through the Australian Government's ReportCyber service on cyber.gov.au. Reporting is important, but it does not guarantee that anything will be recovered.

Hypothetical Example

Hypothetical example. A deceased leaves a will appointing a single executor, a hardware wallet found in a locked cabinet, a written backup card kept separately, and statements suggesting an account with an Australian exchange. The executor secures both items without restoring the wallet, records where each was found, obtains a grant because the exchange requires one, and asks the exchange for its deceased-estate requirements using contact details verified from the provider's own site. Date-of-death values are recorded with their sources. Before any transfer, the executor takes legal and tax advice on the Division 128 position and on whether to sell or transmit, sets the proposal out in writing to the beneficiaries, and plans the transfer with independent address verification and a small test transaction. This scenario is illustrative only; outcomes depend entirely on the particular facts, the will, the provider's requirements and the advice obtained.

9. Planning Effectively During Life

Most of the difficulty in these estates is avoidable with planning that separates information from secrets:

• Keep a current schedule of holdings and platforms — asset, provider, wallet or account reference, approximate value — without recording any credential in it.
• Never put a recovery phrase or private key in a will. A will can become publicly accessible once a grant is made.
• Use a separate, secure access arrangement. A confidential memorandum or custody arrangement should be secure, kept current, and discoverable by the authorised person without exposing the secrets. Whether the will should refer to its location at all is a security judgement, not a default.
• Do not treat a "digital executor" as an office. There is no separate statutory role created by using the label. A technically skilled adviser can assist, but legal responsibility remains with the duly appointed executor or administrator unless that person is themselves appointed.
• Think carefully about specific gifts. A gift of particular tokens, a particular wallet or a stated quantity raises questions of sale, conversion, forks, staking rewards, platform failure, insufficiency and ademption before death.
• Give the executor flexible powers to deal with digital assets and to engage specialist custody, recovery, forensic or tax assistance — without writing technical procedures into the will that will date quickly.
• Review the arrangements whenever holdings, providers, wallets or beneficiaries change.

See our Wills & Estate Planning service for advice on documenting these arrangements.

Sources and Further Reading

• Income Tax Assessment Act 1997 (Cth), consolidated text — Division 128 (effect of death) and the general CGT provisions.
• Australian Taxation Office — cost base of inherited assets
• Australian Taxation Office — how CGT applies to inherited assets
• Australian Taxation Office — crypto asset investments, including transactions and record-keeping
• Trustee Act 1958 (Vic), in-force version — including section 63.
• Supreme Court of Victoria — wills and probate
• Scamwatch — report a scam
• ReportCyber (cyber.gov.au) — report a cybercrime