The value of bitcoin scaled new heights in 2017. If the trend continues, it is likely the digital currency will be around (bubble or no bubble) long after its investors are gone.

But, as you would a bank account or a house, can you pass on your cryptocurrency stash to your kids after death?

The short answer is yes — it just requires some planning.

Dr John de Groot of wills and estate law firm de Groots says it is an issue that the legal community expects to become more common, similar to other valuable "digital assets" such as Frequent Flyer points.

What is Bitcoin? A digital cryptocurrency

A digital cryptocurrency It operates on a decentralised peer-to-peer network, with no central authority or government backing

It operates on a decentralised peer-to-peer network, with no central authority or government backing They can be bought with fiat currencies like Australian dollars from online exchanges or created through mining

Most importantly, he suggests, your executor or heirs need to know about your digital assets in the first place, and how to access them. This is more tricky than passing on cash in a bank account.

Cryptocurrencies are not backed by any government regulator. For the most part, they are not held by traditional financial institutions that know your name, address and other identifying details.

Instead, most people store and send bitcoin from an encrypted digital wallet.

Wallets often use two keys to allow the owner access: a public key that anyone can see and a private key (basically, a random set of numbers and letters that acts as a password).

"Many people who own bitcoin are giving up only enough information to get a registered wallet, but they're not wanting to give up their names," points out Philippa Ryan, a barrister and law lecturer at the University of Technology Sydney.

But if your inheritors do not know those keys, there is almost no way they can get your bitcoin.

It also depends on whether the person holding onto the bitcoin is keeping it intentionally secret — whether for a nefarious purpose or otherwise — or just private.

"It's the same for people who hoard money in tax havens," Dr Ryan adds. "If you do that and you die, you're in trouble. Your estate is in a lot of trouble."

Bitcoin crossed over the $US11,000 mark in 2017. ( Flickr: Fabian Figueredo )

So many assets are now stored online, fraud is also becoming easier, Dr de Groot warns. Online keys and passwords can give someone an extraordinary amount of access to your finances.

That means you need to think about how to securely pass on those details, whether you give them to a lawyer for safe keeping or to a trusted family member.

"Without them, accessing it is a nightmare," he adds. "With them, security is a nightmare."

Don't forget tax

Once your inheritors have your bitcoin, will they be stuck with the tax bill?

The first thing to know is that Australia has no inheritance tax, but that does not mean you can take the bitcoin and run.

According to Professor Miranda Stewart, director of the Tax and Transfer Policy Institute at the Australian National University, inheriting bitcoin is like inheriting shares.

The Australian Tax Office has ruled that bitcoin should be treated like an asset for income tax purposes.

That means you may need to think about Capital Gains Tax (CGT), an ATO spokesperson confirms, depending on your specific circumstances.

If you inherit shares, you do not have to pay CGT at that time. But if you sell them later, CGT may kick in. Bitcoin would be treated similarly.

Consider this scenario: "If your mum paid $100 for shares and now they're worth $150 and you inherit them, then there's no tax at the time of inheritance," Professor Stewart explains.

"But when you sell the shares later … you [may be] taxable on the whole gain — the $50."

An accountant will be able to give tailored advice, but all this emphasises the importance of record keeping.

"Keeping sufficient records of all acts, transactions and circumstances that can reasonably be considered relevant in determining your CGT liability, will make it easier for the beneficiaries under your will to determine the cost base for those assets," the ATO says.

If you plan on investing in cryptocurrencies, ensure you are keeping adequate notes or your heirs may end up in a complicated situation.

"The other issue is going to be that people think they have bitcoin and it's under the radar — that the tax office won't find it — so they won't declare it," Professor Stewart says.

"They won't declare they've inherited it. That's a bit of a challenge for administrators, but that would be tax evasion."

Bitcoin may be digital, but it is very real to the taxman.