Millions in cryptocurrency assets could disappear if owners pass away. Discover ways to safeguard these holdings

Passing Down Crypto: Modern Estate Planning Challenges

Today, digital assets like bitcoin (BTC) are increasingly part of family wealth—whether through early investments or encouragement from younger generations. As a result, transferring wealth between generations now often involves cryptocurrencies.

In the past, families faced uncertainty about how to treat crypto in estate planning. Questions arose about whether digital assets were considered property and how they fit into wills and trusts. Fortunately, many regions have updated their legal frameworks to address digital assets, making it easier to include them in estate plans.

Despite these regulatory improvements, managing digital assets remains a complex task for many financial advisors. Christopher Nekvinda, director of global learning operations at Cannon Financial Institute, notes that advisors often feel out of their depth when discussing crypto with clients who may know more about these assets than they do. This knowledge gap can make advisors hesitant to address digital assets in wealth planning.

With over 50 million adults in the U.S. holding crypto, it’s increasingly likely that digital assets will need to be passed to heirs. Estate planners and wealth advisors must adapt their strategies to handle the unique challenges of transferring cryptocurrencies to the next generation.

Identifying Crypto Ownership and Storage

The first step for any estate planner is to determine whether a client owns crypto and how it is stored. If digital assets are present, further questions arise: How are these assets secured? Who has access or signing authority? Are beneficiaries informed of the owner’s wishes? Is there documentation specifying whether assets should be sold or retained?

Control over crypto hinges on custody, typically managed through private keys—long, complex codes that grant access to the assets. These keys might be entrusted to digital asset custodians such as exchanges like Coinbase (COIN), specialized firms like Bitgo (BTGO) or Fireblocks, or stored on hardware wallets like Trezor. Some individuals may even print their keys and store them in a safe or deposit box.

Transferring Crypto: Legal and Practical Considerations

While using a custodian can simplify holding digital assets, questions remain about how heirs can access these assets. According to Nekvinda, recent updates to U.S. law—specifically the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA)—have clarified the process. With proper documentation, custodians like Coinbase are now legally required to grant executors or trustees access to a deceased person’s digital assets, similar to traditional securities.

When Crypto Goes Missing: The Detective Work

Despite these legal advances, some digital wealth can still disappear. Unlike traditional assets, crypto can be lost due to probate delays, missing private keys, or executors unfamiliar with digital assets, warns Azriel Baer, an estate planning attorney at Farrell Fritz in New York. Baer has seen cases where millions in crypto were lost to heirs because of inadequate planning.

He emphasizes the importance of appointing someone with digital expertise to manage these assets—someone comfortable with online accounts, blockchain transactions, and digital security. Naming a trusted but inexperienced relative may not be enough if they lack the technical know-how to access crypto wallets.

Another common pitfall is relying solely on digital records—such as emails or cloud storage—to store account information. Baer advises clients to maintain a comprehensive list of important accounts and access details, either sharing it with family or securing it in a safe deposit box. Without this, heirs may struggle to locate and access digital assets.

What Happens Without a Will?

If a crypto holder passes away without a will, the legal process for distributing assets involves appointing an administrator. Baer notes that probate can take six to ten months, during which time no one can manage the assets—a significant issue for volatile cryptocurrencies that may require quick action.

To address this, trusts can be established to allow immediate access to digital assets upon death, bypassing the delays of probate. In some cases, forming a limited liability company (LLC) to hold crypto can make transferring ownership easier and more efficient.

Baer also cautions against including sensitive information, such as private keys, in a will. In New York, wills become public records once filed with the Surrogate's Court, potentially exposing confidential data to the public.

• Ensure digital assets are clearly documented and accessible to trusted individuals.
• Appoint an executor or trustee with digital asset experience.
• Consider using trusts or LLCs for more efficient transfers.
• Never include private keys or sensitive information in public documents like wills.