CryptoCurrency and Estate Planning

Secrets to estate planning for cryptocurrencies

Does your estate include any crypto? Bitcoin, Ethereum, others? If it does, you may need an updated estate plan or you risk losing it all! In this article, we will discuss what you need to know about estate planning for cryptocurrencies. We will cover what to do with your cryptocurrency when you die, how to designate a beneficiary, and how to make sure your loved ones can access your digital assets.

The basics: What is cryptocurrency and how does it work?

Cryptocurrencies like Bitcoin and Ethereum are a new way to invest your money. Before you invest in them, it is important to understand the basics of how they work. In somewhat non-technical terms, cryptocurrencies are digital assets that use computers to secure their transactions. When you invest in cryptocurrencies, you are essentially buying units of digital currency (in other words, digital money). These units can be stored in a digital wallet, which is like a bank account.

Because they exist only in the digital world, crypto assets are not subject to the same government or financial institution control that banks have to abide by (for now, anyway). Bitcoin, which is the first and probably most popular cryptocurrency, was created in 2009. Since that time, there have been thousands of other cryptocurrencies created.

While cryptocurrency is not the same as investing in stocks, it’s close enough to use as an example for comparison. There are differences from traditional stock investing, and because this is all brand new, the landscape is changing day to day. You choose which cryptocurrency to invest in, and the values change over time. And like stocks, the values can go up, or down, and you can gain or lose money in the same manner as you would in the stock market. Cryptocurrency can be used to purchase goods and services, and we are starting to see it as part of investors’ retirement accounts.

You can even invest in digital works of art, called NFTs, for Non-Fungible Tokens, which contain digital images and other work in the same way you’d buy an original painting or sculpture!

Security of Cryptocurrency: The good and the bad

One of the most highly touted benefits of cryptocurrency is its security, but be careful, it can be a double-edged sword. They offer a high degree of privacy and security because the currency can be stored in an online “wallet” or even on a particular computer, hard drive, or thumb drive. While the security aspect is great, it’s by no means foolproof. Check out this article from on hackers breaking into digital security and stealing some of those NFT digital works of art, worth millions! That heightened security can work against you if you’re not careful. More on that is below.

The two-edged sword part of all this is that security can sometimes keep you out of your accounts! If you forget the passwords or lose the hard drive, the assets can be lost forever. Check out this story in the New Yorker bout a guy whose computer was accidentally thrown away, with all of his crypto assets on it. The assets are lost (buried in the city dump somewhere) and he’s unlike to get them back, though he’s trying. The crypto on the computer is worth almost HALF A BILLION DOLLARS!

What you need to know about estate planning for cryptocurrencies

This is one of those times when the security of crypto can work against you if you haven’t planned for it. When you die, your cryptocurrency will be considered part of your estate, because most crypto providers do not allow you to name a “payable on death” beneficiary on your crypto account. One of the largest crypto providers is Coinbase, and they don’t allow beneficiaries to be named on your account. Take this language, sampled directly from the Coinbase website:

"Can I name a beneficiary on my Coinbase account?

Typically, naming a beneficiary on your Coinbase account would be done with your estate planning attorney. Like most other assets, the ownership of your Coinbase account would be transferred according to your will or other arrangements made with your legal counsel. It's not currently possible to name a beneficiary directly within your Coinbase account, rather, in the event of your death, we would follow our standard ownership transfer procedures described above.

If you can’t name a beneficiary, then there is no one for the asset to automatically pass to at your death, other than to your estate. This means that it will be subject to probate, and your loved ones will need to go through the court system to access it.

You can designate a beneficiary through your Will. While we do recommend that your Will include access to digital assets (and it must be VERY specific for the crypto provider to honor it), it’s more of a safeguard than a primary plan. Passing crypto through your Will is not the best option, as Wills are subject to probate and must go through the probate process, which means time and money.

If you pass away and leave your assets to your spouse or beneficiaries, but your Will doesn't specifically allow access to your cryptocurrency provider/wallet, the provider can DENY ACCESS to your executor or personal representative! Even if your Will says "All my assets go to my kids" the crypto provider can still deny them access, and the funds are lost! How do you know if your estate plan includes appropriate crypto language? Have it reviewed by an estate planning expert. But if your Will is over 2 years old, it's highly unlikely that you have the necessary language in your documents. Then you risk losing it forever.

Unless you plan ahead and follow some expert estate planning advice. Spoiler alert: you can avoid this by using trusts.

The secret way to designate a beneficiary for your cryptocurrencies

While most providers like Coinbase don’t allow the naming of beneficiaries, they do enable crypto accounts to be in the name of a trust. You can create a trust and name the trust as the owner of your crypto account. The trustee (which in most cases is you) will then manage the assets just how you always have. But if you die, the trust can keep or distribute the assets to your named beneficiaries. With NO PROBATE COURT involvement!

There are many different types of trusts for cryptocurrency, ranging from revocable trusts to more sophisticated trusts that provide tax advantages. At the time of your death, the funds in the trust can be passed on to beneficiaries, or even to charities, which will provide you with some present, and future, tax breaks. Read our article on crypto tax breaks to learn more.

What if you are alive, but incapacitated?

Let’s say you suffered a stroke, an accident, or had dementia. It’s not pleasant to think about but in the real world, these things do happen. Most estate planning lawyers will recommend that you have a Durable Power of Attorney. This document allows someone else to act on your behalf if you can’t do so for yourself, such as if you were suffering from Alzheimer’s disease.  

With a Power of Attorney, a person you designate, such as a spouse, can act on your behalf. They can talk to banks, insurance companies, and financial institutions. But remember, crypto has its own rules. The catch: the document MUST have specific language allowing access to your crypto accounts, or the crypto could be lost forever! If your documents are more than a few years old, it’s highly unlikely that they contain language that will satisfy the crypto provider. You’d think they would be reasonable, but they won’t. That poor guy who lost $500 Million because his laptop was thrown away didn’t get any sympathy or help. He either finds the computer or the money is lost.

Crypto Passwords

Even with the proper documents in place, it’s still a good idea to give your executor/personal representative or power of attorney agent the private key to your crypto wallet. The private key is a long string of characters that allows you to access your account. You must protect your private key, so don’t send it by email or text. But you can keep it with your estate planning documents. Some crypto wallets use complex passwords and two-factor authentication, so make sure you keep that info together with your estate plan. At our firm, we provide a special form for this, and when you complete it, we store it in your estate planning binder.

Remember, if you lose your private key, you can lose all your cryptocurrency for good!

Closing Crypto Thoughts

Cryptocurrencies are continuing to grow in popularity, and it is being used more and more. If you thought it was a fad, I can assure you that for good or ill, it’s not going away any time soon. By creating a trust or designating a beneficiary, you can make sure that your loved ones will be able to access your digital assets – it’s the BEST way.

Estate planning for cryptocurrencies doesn't have to be complicated—but don’t entrust it to an estate planner who doesn’t know how to deal with crypto. Make sure that any lawyer you hire for your estate plan knows how to incorporate it into your overall plan. Do it right, or risk losing it forever, like that guy with the lost laptop. For most of us, even if we have a bad day, this is worse.

Want to protect your crypto?

Schedule a Strategic Planning Session at and talk to one of our expert attorneys. You can also call our office at 978-657-7437 to learn more.

Michael Monteforte, Jr.
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People come to me in trying times and when I tell them I can help them, the weight falls off their shoulders.