Gifting or inheriting crypto: recording origin and valuation correctly
Date: | Week: 30 | Reading time: 7 minutes | Updated: Author: Tyler Dijst
In short
Gifting crypto or inheriting it means you will later want to show where the crypto came from and what it was worth at the moment of the gift or the death. Often that goes smoothly; sometimes questions from the bank or HMRC arrive years later. Recording it up front puts you in a strong position.
Paucitas is an independent expert firm in the Netherlands that establishes the origin and legitimacy of crypto assets. Questions about origin usually come from the tax authority or the bank. Paucitas records the origin and the value at the reference date in a report.
Get in touch with Paucitas or call +31 20 244 5774. In a free intake you will hear what evidence your situation needs.
In a nutshell
With a gift or inheritance of crypto, two things count: where it came from, and what it was worth at that moment. Paucitas records both in a way that can be checked, so you do not have to go searching later.
You want to give crypto to a child, you have received crypto, or there is crypto in an estate. That raises questions. How do you show later that it was obtained legitimately? And which value counts? Those are perfectly normal questions, and you are not the only one asking them.
This blog is about recording origin and value when crypto is gifted or inherited. If it is mainly about an estate with unknown wallets, also read crypto in an estate.
What should you record when gifting crypto?
With an ordinary gift, a bank statement is often enough. Crypto is different: the price changes by the hour and holdings are often built up across several wallets. So it helps to record a few things together at the time of the gift.
- A short statement signed by both parties, with the date, coins, amounts and wallet or exchange addresses.
- The transaction on the blockchain or the exchange's transfer confirmation.
- The origin on the giver's side: how and when they bought or received the crypto.
- The value at the moment of the gift, with the price source used.
With these records you can later show your bank or HMRC where the money came from. More on origin in origin of assets.
Which value counts when crypto is gifted or inherited?
In the UK, gifts can count towards Inheritance Tax if the giver dies within seven years; the rules are on GOV.UK, rules on giving gifts. Giving crypto away can also count as a disposal for Capital Gains Tax, as HMRC explains in its guidance on cryptoassets. Either way, the value at a specific moment matters. That is why Paucitas records, per coin, the amount, the time of transfer and the price with its source. Which value goes into a tax return is something you decide with your adviser.
With an inheritance, it is not the moment of a gift that counts but the date of death. The principle is the same: origin and value must be verifiable at that reference date.
Not sure what to record? Let Paucitas take a look with you. You can always call, 24/7, on +31 20 244 5774.
Why do banks or HMRC ask about origin later on?
Under the Money Laundering Regulations 2017, banks have to understand where their customers' money comes from. If you receive a larger sum that comes from crypto, a question about its source is entirely normal. It does not mean anything is wrong. HMRC may also ask when and how you received the crypto.
The tricky part is that such a question often comes years after the gift. By then the giver may not be reachable, or exchange records may have gone. Recording it up front avoids that. Also read why your bank asks about the origin of crypto.
An example from practice
A father gave his daughter some of the bitcoin he had bought in 2017. There was no written statement. Three years later she wanted to buy a house and the bank asked where the money came from.
Paucitas reconstructed the bitcoin's route: the purchase on an exchange, the transfer to his own wallet and the gift to his daughter. Each step in the report showed the date, the amount and the price. The bank could follow it step by step.
Paucitas takes privacy very seriously and never shares clients' personal details. This is a composite example: names, amounts and details have been changed. The situation is one we see in practice.
What is the difference between gifting and inheriting crypto?
With a gift, you record the value at the moment of the gift. With an inheritance, the date of death counts. An inheritance often brings an extra question: are all wallets and access details known? Sometimes heirs do not know exactly what there was, or where.
In that case Paucitas first maps out what can be shown. We say honestly where the records stop. If executors or a solicitor need to divide crypto in an estate, a report that anyone can follow step by step helps. Also read who can help show where crypto came from.
How does Paucitas record origin and value?
Paucitas does all tracing itself, without tracing tools. We follow the crypto back from the recipient's wallet to its origin with the giver or the deceased: the purchase, the transfers and the gift itself. Each step is linked to a time and a price. We also go through documents, emails, messages and other communication around the purchase and the gift, so that a complete picture emerges, with a timeline of where the assets came from and where they went.
You receive a report that anyone can follow and understand step by step: your adviser, the solicitor, the bank or HMRC. Your answer then rests on facts, not on an estimate made after the event. More on our approach in proving the origin of assets and asset verification.
Who helps substantiate gifted or inherited crypto?
Paucitas. We provide the factual evidence; your tax adviser or accountant handles the return. We often work alongside advisers in this way.
- Costs: every investigation is tailored. You receive a tailored quote in advance that we go through together, with no surprises.
- Turnaround: from the same day to around two weeks.
- Contact: you can always call, we answer the form within 1 to 3 hours, and email within 24 hours, usually the same day.
Want to record a gift or inheritance of crypto properly? Get in touch for a no-obligation introduction, or call +31 20 244 5774. Are you an accountant? Then read substantiating crypto origin for accountants.
Sources: GOV.UK, Inheritance Tax rules on gifts; GOV.UK, tax on cryptoassets; legislation.gov.uk, Money Laundering Regulations 2017, regulation 28.
Do you have questions about this blog?
Feel free to get in touch with Paucitas. Paucitas can be reached by phone 24/7, including evenings and weekends. Through the contact form we usually reply within 1 to 3 hours, and we answer e-mail within 24 hours.
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Frequently asked questions about gifting or inheriting crypto
How do I record the origin of gifted crypto?
Paucitas does this with a reconstruction showing how the giver obtained the crypto and which wallets it passed through up to the gift. Paucitas records that in a report anyone can follow.
Which price do I use for the value of the gift?
Paucitas explains: the value at the moment of the gift matters. Paucitas records the time and the price with its source. Which value you report is something you decide with your adviser.
Does Paucitas give tax advice?
Paucitas does not give tax advice, but provides the evidence of origin and value. The tax return and the tax assessment are for you or your tax adviser.
What if the gift was years ago and nothing was recorded?
Paucitas sees that often. Transactions stay on the blockchain, so a lot can often still be reconstructed afterwards. Paucitas says honestly where the records stop.
What does an investigation into gifted or inherited crypto cost?
Paucitas tailors every investigation. You receive a tailored quote in advance that we go through together, with no surprises. The intake is free and without obligation.
From Amsterdam, for the whole of the UK
Everything can be done fully online. Prefer to meet in person? You are very welcome at our office in Amsterdam, by appointment.
Paucitas is an independent expert firm based in the Netherlands that, for clients across the UK, investigates investment fraud and crypto fraud, establishes the origin and legitimacy of crypto assets and prepares expert reports for legal proceedings and compliance.
Your own situation
If you are reading this, you probably have a question about your own situation. That is exactly what Paucitas does.
The first step is contact by phone. You can book that call by phone or through the contact form, so you do not have to wait. In the call we look together at what can factually be established in your case and what Paucitas can examine for you.