Cryptocurrency in an estate plan
Estate planning is more complex for individuals with cryptocurrency. Unlike traditional assets, cryptocurrency is not regulated by federal authorities, which may make it difficult for heirs to access them after the owner's death. Proper planning ensures digital assets are successfully transferred to loved ones and beneficiaries.
There are two main ways to own crypto: on a cryptocurrency exchange, or in your own wallet with private keys.
Crypto Exchanges vs. Private Keys
Casual crypto investors prefer large exchanges, such as Binance and Coinbase. The user experience is similar to mainstream banking or stock investing.
The more serious crypto investor holds assets in hard or soft wallets or vaults, access is often more an issue than legal ownership in this case. Owners should make arrangements for transferring seed phrases or private key material to their heirs. There are many horror stories of people dying without leaving the keys to heirs.
Since the large exchanges act like a normal brokerage account, estate planning looks like this:
- Name the beneficiaries.
- Make a will.
- Put in trust.
Attention heirs: The main crypto exchanges only allow individual account owners. No trusts, or even LLCs. Again, consult with an advisor for how to proceed.
Investors with private keys have a different path for secure estate planning. An analogy to private keys is a standard bank account:
- Do heirs know where the private key is located (usually on paper or on a USB drive)
- Do heirs understand fully how to access the account using the key
- Ensure the key is never exposed, duplicated or written into a will
As cryptocurrencies and digital assets continue to gain prominence, it’s imperative that estate plans account for these unique assets in a manner that makes them easy to access. Consult with an estate planning professional to add crypto assets to your estate plan.