Why Cryptocurrency Ownership Demands Estate Planning

A cryptocurrency investor who died in an accident at age 33 had allegedly accumulated about $60 million in Bitcoin, Ethereum, RP, and Cardano. We’ll still never know if this was true because his crypto millions died with him. His estate plan did everything but address his digital assets, reports the article “Estate Planning With Cryptocurrencies” from Think Advisor.

No one knew how to access his cryptocurrency; he left no information about his digital passkeys and lost whatever he may have owned.

As this relatively new asset class continues to grow in value and use, it becomes increasingly important to have a plan to transfer assets to loved ones and protect the wealth from being lost. Many people who are invested in cryptocurrency tend to be younger and aren’t thinking about dying. However, as the example above illustrates, they need to think differently.

Accessing digital investments is impossible without the correct information. Cryptocurrencies are decentralized, so there’s no one to call when the owner dies. Another issue: as investors become wealthier, they are more likely to become targets of scammers who are aware of the vulnerabilities of this asset.

Personal Representatives, trustees and heirs must have the information about storage and private keys. Unless someone else knows about private keys and how to access them, the cryptocurrency may be lost forever if you are incapacitated or have died. The cryptocurrency may also be tangible or intangible property, depending upon whether it is stored on an external hard drive, in a digital wallet, or on a cryptocurrency exchange.

Knowing how to access a crypto wallet is critical. However, there’s more to know. Information should not be in a will, which becomes publicly available upon probate. Anyone who has access to the private key can withdraw funds.

A letter of instruction may be the best way to provide information and ensure privacy. For self-custodied wallets, using third parties for security and verification may be a better approach.

It might make more sense to hold cryptocurrencies in trust, making sure the trustees are familiar with digital investments and know how to manage and access the accounts.

As the cryptocurrency sector continues to grow, it becomes more critical to have an estate planning attorney prepare for digital and traditional assets. Smart decisions about how to hold cryptocurrencies will make the difference between a legacy of wealth and millions lost in cyberspace.

Reference: Financial Advisor (Jan. 6, 2025) “Estate Planning With Cryptocurrencies”