What happens to crypto if the owner loses capacity?

Crypto does not automatically become accessible when its owner can no longer manage their affairs. The practical outcome depends on two separate questions: who has authority to act for the person, and what is technically needed to reach the assets.

An England and Wales property and financial affairs lasting power of attorney (LPA) may give an attorney authority to deal with money and property once it is registered, subject to the LPA’s terms and the donor’s instructions.[1] That does not guarantee that an exchange will accept the attorney’s paperwork, or that anyone can recreate access to a self-custodied wallet. A private key or recovery phrase is a security credential, not proof that a particular person has legal authority to use it.

If there is no usable authority, or if the arrangement does not cover the decision, the family may need professional advice about the appropriate route. Scotland and Northern Ireland have different power-of-attorney systems, so England and Wales guidance should not be treated as UK-wide law.[1][2]

This is general information, not legal, tax or financial advice. A solicitor, accountant or other appropriately qualified adviser should assess the person’s circumstances, jurisdiction, the wording of any document and the provider’s terms.

The problem is access, not just ownership

A crypto holding can be split across exchange accounts, broker or platform accounts, mobile apps, hardware wallets, paper records and devices. HMRC’s record-keeping guidance describes paper, electronic and hardware wallets, exchange downloads, bank statements and wallet addresses as records that may matter.[7]

That creates two different failure modes:

Account-based custody: a company holds or controls the account interface. The attorney may be able to ask the provider what evidence it needs, but the provider’s identity checks, terms and security process still matter.
Self-custody: the person controls the keys through a wallet or device. There may be no company that can reset access. Without the right signing credential, a legal document alone may not open the wallet.

These categories can overlap. Someone may use a self-custody wallet while also keeping an exchange account, and a hardware wallet may be useless without its PIN, passphrase or recovery material. The point is to identify the arrangement before anyone assumes that a power of attorney, a login password or a wallet address solves the problem.

A public wallet address can help identify transactions. It does not by itself prove who owns the assets or provide spending authority. Do not publish a full address, account identifier or personal records unless there is a clear reason and the privacy implications have been considered.

What a property and financial affairs attorney may be able to do

GOV.UK describes a property and financial affairs LPA as covering matters such as bank accounts, bills, tax, property and investments. It can be used after registration, and may be used while the donor still has capacity if the LPA allows it and the donor gives permission.[1][4]

The document is not a universal crypto-access pass. An attorney can only act within the authority granted by the LPA and must act in the donor’s best interests. The Office of the Public Guardian says attorneys should consider the donor’s wishes and consult professional advisers where appropriate.[2]

The provider may ask for a certified copy of the LPA, identification, proof of address, an account number or other information. GOV.UK says banks and other financial bodies may require the original or a certified copy before giving an attorney access to accounts.[2] A crypto platform may have its own process, and some services may not offer the same type of attorney access as a bank. Check the current provider terms rather than assuming that an LPA will be accepted in a particular way.

An attorney also has record-keeping duties. GOV.UK says they should record important decisions, the donor’s assets, income and spending, advice received and disagreements.[3] The donor’s finances should normally be kept separate from the attorney’s own finances.[2][4] That matters for crypto because a transfer between wallets can be difficult to explain later if there is no contemporaneous record of why it happened, who authorised it and where the asset went.

Do not move or sell crypto simply because access has become inconvenient. The authority, the donor’s best interests, tax position, security risks and the provider’s rules may all need to be considered first.

What changes with self-custody?

With self-custody, the practical question is whether the authorised person can safely use the required wallet credentials. An LPA can establish a person’s authority to make decisions, but it does not manufacture a missing private key, recovery phrase, device PIN or passphrase.

Keep the categories separate:

Discovery information can include the name of a wallet app, a hardware-wallet model, a public address, an exchange name, transaction records and where devices or paperwork are stored.
Access secrets can include a private key, recovery phrase, wallet passphrase, device PIN or exchange password and authentication method.
Authority documents can include an LPA, deputyship or, after death, probate documents. These may help explain who is entitled to act, but they are not substitutes for access secrets.

Never put a recovery phrase, private key, wallet password, authentication code or full set of instructions that would unlock funds in a will, probate application, email, shared spreadsheet or other public-facing document. GOV.UK says the original will sent with a probate application becomes a public record.[5] The NCSC also advises treating credentials as sensitive information and protecting stored credentials and decryption keys.[8]

A safer planning document can say that a wallet exists, identify the type of asset or service, describe where the separate secure record is held and name the professional adviser to contact. It should not reproduce the secret itself. The exact arrangement is a matter for the owner and qualified legal and security advice; there is no standard solution that is safe for every wallet.

Records to prepare before there is an emergency

The aim is to make assets discoverable without making them spendable by anyone who finds a document. HMRC says an individual should keep their own crypto transaction records because an exchange may retain records only for a short period or may cease to exist.[7]

A useful inventory might identify:

exchanges, brokers, apps and other services used;
whether each holding is account-based or self-custodied;
hardware wallets, phones, computers and backups, without listing unlock secrets;
public addresses or transaction references where they are needed for identification;
approximate dates of purchases, transfers and disposals;
account statements, CSV exports, bank records and tax records;
the location of the separate secure access arrangement;
the name and contact details of a solicitor, accountant or other adviser;
instructions for what to do if capacity is lost, an account is locked or a device fails.

Keep the inventory current. Record the date it was checked and avoid storing a single copy in an exposed cloud folder or an unprotected document. If a password manager or encrypted storage is used, understand its recovery model and who, if anyone, can access it. The NCSC warns that lost decryption keys can mean lost access, while recovery mechanisms can create their own risks.[8]

What happens after the owner’s death?

Loss of capacity is not the same as death. An attorney’s authority and an executor’s role are different, and an LPA usually ends when the donor dies. After death, the personal representative is responsible for the estate’s assets during administration, and probate may be needed before some assets can be dealt with.[6][9]

GOV.UK says the original will sent with a probate application is retained by the probate registry and becomes a public record.[5] That is one reason a will should identify the existence of assets and the location of private instructions without containing credentials that could be used to spend them.

HMRC treats cryptoassets as property for Inheritance Tax purposes, while the tax and valuation consequences depend on the facts.[10] A representative may need transaction records, balances and supporting documents. That is a reason to keep records, not a reason to publish secrets or assume that a wallet address answers every ownership question.

Questions to prepare with an adviser

Before capacity becomes an issue, the owner and their adviser may want to discuss:

Which assets are held through a provider, and which are self-custodied?
What does the current LPA or other authority actually cover?
Is the LPA registered, and are certified copies available?
Which decisions might an attorney need to make: paying costs, preserving value, transferring assets or selling them?
What evidence will each provider require from an attorney?
How will the owner document wishes without placing secrets in a public document?
Where is the separate secure record, and what happens if a device, password or authentication method is lost?
Who should be contacted first: a solicitor, accountant, provider or security professional?
How will decisions, advice, transfers and disagreements be recorded?
What changes if the owner dies, or if the family is in Scotland or Northern Ireland rather than England and Wales?

There is no single standard arrangement for incapacity and crypto. A plan that works for an exchange account may be useless for a self-custodied wallet, while a plan that makes a recovery phrase easy to find may also make theft easy. The useful preparation is a dated inventory, a carefully considered authority route, secure handling of access secrets and advice from professionals who understand both the legal and technical parts of the problem.

Internal links

Sources

[1] https://www.gov.uk/power-of-attorney
[2] https://www.gov.uk/government/publications/how-to-be-an-attorney/how-to-be-an-attorney-property-and-financial-decisions
[3] https://www.gov.uk/manage-lasting-power-attorney/records-duties
[4] https://www.gov.uk/manage-lasting-power-attorney/property-financial-affairs
[5] https://www.gov.uk/applying-for-probate/if-theres-a-will
[6] https://www.gov.uk/probate-estate
[7] https://www.gov.uk/hmrc-internal-manuals/cryptoassets-manual/crypto10400
[8] https://www.ncsc.gov.uk/collection/passwords/password-manager-buyers-guide
[9] https://www.gov.uk/manage-lasting-power-attorney/end
[10] https://www.gov.uk/hmrc-internal-manuals/cryptoassets-manual/crypto25000