Gifting and inheriting cryptocurrencies: how can you avoid tax and practical pitfalls?

However, an important question arises: what happens to a cryptocurrency portfolio when its owner wishes to gift it or passes away?

Unlike traditional bank assets, crypto-assets present specific legal, tax and practical challenges. Proper preparation is therefore essential to prevent crypto wealth from being lost or subject to unnecessarily high taxation.

1. Crypto-assets form part of your estate

From a legal perspective, cryptocurrencies are generally considered intangible property rights in Belgium. They therefore form part of an individual's assets and can be transferred, gifted or inherited.

This means that cryptocurrencies can be included in wealth planning in the same way as other movable assets. The underlying blockchain technology does not change the fact that the economic value of crypto-assets forms part of their owner's wealth.

In practice, however, crypto-assets require particular attention, as access to a portfolio depends entirely on control of the private keys.

2. Gifting a cryptocurrency portfolio

2.1. Can cryptocurrencies be gifted?

A cryptocurrency portfolio can legally be gifted.

As cryptocurrencies are considered movable assets, the standard rules governing gifts of movable property apply.

The donor can:

• transfer full ownership;
• gift bare ownership while retaining usufruct;
• transfer part of the portfolio;
• gift specific cryptocurrencies.

2.2. Registered or unregistered gifts?

As with other movable assets, you can choose between a registered and an unregistered gift.

No gift tax is payable on an unregistered gift of cryptocurrencies.

However, this tax advantage comes with an important risk. If the donor dies within the five-year risk period applicable in the Flemish Region, the gifted portfolio is included in the estate after all, and inheritance tax may become payable.

If the gift is registered, gift tax is payable at the applicable Flemish rates, namely 3% for gifts in the direct line and between partners. For larger cryptocurrency holdings, registration often provides valuable legal certainty.

2.3. How does the transfer work in practice?

Transferring crypto-assets requires more than a simple agreement between the parties. Actual control over the assets must be transferred.

In practice, several methods are possible:

• transferring the cryptocurrencies to the recipient's wallet;
• transferring a hardware wallet;
• transferring the private keys;
• transferring the assets through an exchange account.

From a legal evidence and tax perspective, it is advisable to document the transfer clearly. In the event of a subsequent audit, it must be possible to demonstrate that the gift actually took place.

3. Inheriting a cryptocurrency portfolio

3.1. Cryptocurrencies form part of the estate

When a cryptocurrency owner passes away, their crypto-assets form an integral part of their estate. They must be included in the inheritance tax return and are subject to the standard inheritance tax rates, which range from 3% to 27% in Flanders for direct descendants and partners.

The fact that the assets are held on a blockchain or through a foreign exchange does not change this.

The value of the crypto-assets in the estate is determined based on their market value on the date of death. The specific valuation rules applicable to listed financial instruments do not apply to crypto-assets.

For the heirs, this value will also serve as the acquisition cost when calculating any taxable capital gains for future income tax purposes.

Accurate documentation of cryptocurrency prices on the date of death is therefore essential. Particularly for substantial portfolios, it is advisable to support the valuation carefully with objective market data.

3.2. The biggest risk: lost private keys

The greatest risk for heirs is not inheritance tax, but losing access to the portfolio.

Without the private key, cryptocurrencies cannot be managed, sold or transferred. Worldwide, billions of euros worth of cryptocurrencies have already become permanently inaccessible because their private keys were lost.

If heirs cannot access the portfolio, this also creates a complex tax situation. The crypto-assets legally remain part of the estate, but they are economically unavailable.

3.3. The importance of a will

For cryptocurrency investors, a carefully prepared will is often essential.

A will can specify:

• which cryptocurrency portfolios exist;
• where the assets are held;
• which exchanges are used;
• how heirs can gain access to the assets;
• who may act as executor of the estate.

Naturally, sensitive information such as private keys and recovery phrases must be handled with care.

Secure digital vaults are increasingly being used to store this information confidentially and make it available to heirs in a controlled manner after death.

4. Conclusion

Crypto-assets are now an established part of personal wealth and therefore deserve the same attention in estate and wealth planning as traditional investments.

Making a gift in good time can reduce inheritance tax and facilitate the transfer of wealth. A carefully prepared will can prevent crypto-assets from becoming inaccessible to heirs after death. At the same time, the technological nature of crypto-assets requires thorough documentation of wallets, private keys and transfer arrangements.

For investors with substantial cryptocurrency holdings, an integrated approach that considers tax, civil law and practical aspects is no longer an unnecessary luxury. On the contrary, proper planning today can help prevent significant tax liabilities and irreversible loss of wealth in the future.

Do you have questions about the tax implications of your cryptocurrency investments in the event of your death, or are you considering gifting cryptocurrencies? Do not hesitate to contact one of our experts.