Why is crypto estate planning important?

Since cryptocurrency assets are decentralized, it’s extremely important that you include them in your estate plan.

Crypto assets don’t have the same failsafe as bank accounts or retirement accounts because they’re decentralized. It’s your responsibility, as the crypto owner, to create a plan that includes your digital assets and clearly explain how your heirs can access them. If you don’t, there’s no centralized authority to help your heirs find or gain access to your crypto. Without a proper plan, these digital assets could be lost in the ether.

How can you include digital assets in your estate plan?

To make sure your loved ones can access your digital assets after you pass away, you must include those assets in your estate plan. Here’s how:

1. Create a will or trust

If you don’t already have an estate plan in place, you should create one. You can do this by creating a will or setting up a trust.

In estate planning, wills and trusts serve a similar purpose: both allow you to decide who should receive your assets and possessions after you pass away. You can also nominate a guardian for your minor children, name a caretaker for your pets, and even leave a gift to charity.

Be sure to consult your attorney to decide which estate planning “vehicles” will serve you and your family best.

Funding your trust

If you create a trust, you also have to take the additional step of transferring your assets into the trust (known as “funding” the trust). This includes your digital assets.

Usually, you would fund a trust by re-titling or re-deeding your property to be in the name of the trust, but cryptocurrency is similar to tangible personal property, like gold or jewelry — there’s no title or deed for these objects, but they’re still valuable items you want to include in your trust.

For these assets, you should speak with your attorney about how to include language that will allow your digital assets to pass seamlessly.

2. Name a beneficiary for your crypto assets

If you own cryptocurrencies, you need to choose who to pass them to.

As with other assets, like your house or bank account, you’ll do this by naming a beneficiary in your will or trust who should receive your digital assets after you die.

If you want to leave your crypto to charity, you should speak to your attorney about the best way to pass them along. Because crypto is a relatively new asset type, not every charity is able to accept it yet. Before you include your chosen charity in your estate plan, you should confirm with them that they accept crypto donations.

3. Consider naming a digital executor or trustee

You’ve listed your crypto assets in your will and chosen who should get them — great! Now you need to choose an executor or trustee. These are people who have these roles are responsible for carrying out the wishes in your estate plan.

Cryptocurrency is a complex topic. It’s possible that the person you trust to carry out the other wishes in your estate plan may not be well-versed in crypto and it may be wise to appoint a separate “digital executor” (or digital trustee) to handle the distribution of your crypto and any other digital assets you own.

4. Make a list of your crypto assets and how to access them

It’s not enough to simply list your crypto assets in your estate plan and name a beneficiary for them. You also need to document where your crypto assets are stored, so your loved ones can find them after you pass away.

There are a few different ways you may be storing your crypto:

• Online cryptocurrency exchange: An exchange is a website or third party where you can buy and sell cryptocurrencies. Some popular crypto exchanges include Coinbase, Gemini, and FTX. (Some crypto exchanges, like Coinbase, will work with your loved ones to transfer your crypto as long as your loved ones can provide a death certificate, probate documents, and other identification after you pass away. Even so, it’s a good idea to record information about your crypto exchange accounts, just in case.)
• Self-custody wallet: A self-custody wallet is a crypto storage solution that’s under your control.
• There are two types: hot wallets are connected to the internet, allowing for easy trading.  Cold wallets are an offline crypto storage solution that aren’t connected to the internet. They’re physical devices that often look like USB drives.

You should keep a detailed record of the type and number of each cryptocurrency you own. For example, say you own $50,000 in Ethereum and $50,000 in Bitcoin, stored in two different wallets. You need to inform your beneficiaries that these assets exist, as well as provide the exact location (either your wallet or exchange) where they can find those assets. Keep this information stored securely with your other estate planning documents, like your will.

However, NEVER put the account information, login credentials, or passkeys in your will, as it becomes public at the time of your death.

5. Record your crypto keys and keep them in a secure place

Crypto “keys” are a string of randomly generated numbers and letters that act as the password to your crypto wallet.

There are two types of keys:

• A public key, also called a “wallet address,” is how you send and receive cryptocurrency. Think of it like your bank account number. You share your public key with others to receive transactions.
• A private key is how you access your crypto wallet. Think of it like your bank account password. It should be kept private.

Your crypto keys are extremely valuable pieces of information — anyone who has both your public and private keys will have access to your wallet and the assets inside it. If you lose or forget your crypto keys, there’s no way to recover them. And if you don’t find a secure way to document your crypto keys before you pass away, it will be impossible for your loved ones to access your crypto.

6. Revisit and update your estate plan regularly

Your circumstances, goals, and relationships will change over time. That’s why it’s important to regularly review your will and estate planning documents. Experts recommend reviewing and updating your estate plan at the very least every 3 years , or any time you have a big life event (like getting married or having a child).

Protect your crypto assets with an estate plan

After you pass away, your beneficiaries can be granted access to your bank or investment accounts by the centralized authority that manages them. The same isn’t true for crypto. 

Because they’re decentralized, crypto assets are fundamentally different than most other assets you own. The responsibility lies solely with you to list where your crypto assets are stored, how to access them, and who should receive them. Without careful planning, your crypto assets could be lost forever.

This is why it’s important to have an estate plan, and to include your crypto assets in it.