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Cryptocurrency and estate planning - important details you need to know

Estate planning seems to be in an ever-constant state of fluctuation primarily due to incredible advancements and innovations in technology. A prime example has been the massive proliferation in digital assets as most people have migrated large portions of their lives, and their assets, online.

Both state and federal law, including estate law, have been relatively slow to catch up to these technological progressions. In fact, it has only been in the past few years that states have actually adopted fiduciary access statutes focused on digital assets contained within estate plans. Even with the passage of fiduciary access statutes, there remain numerous challenges for family members administering a decedent's estate who attempt to access digital assets, particularly different forms of cryptocurrencies, since they are generally controlled by private contract law, rather than state laws.

What exactly is cryptocurrency?

Cryptocurrency is a disruptive form of digital currency that has exploded in popularity. Cryptocurrency is held in a "digital wallet" secured by an extensive password. As a result, it has the same types of access and distribution issues as more traditional digital assets.

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Nowadays, you can use cryptocurrency to purchase products and conduct various other online transactions. Some people possess thousands, or even millions, of dollars' worth of cryptocurrency. In addition, cryptocurrency is considered personal property under the law, which makes it subject to probate. This is why it needs to be incorporated into your estate plan. You need to make sure your crypto assets are protected and can be accessed by your loved ones in case you suddenly pass away or become incapacitated.

Bitcoin, generally considered to be one of the most popular forms of cryptocurrency, is valued at thousands of dollars per Bitcoin, so it is fair to say that many people genuinely believe this type of digital asset has long-term value. Additionally, the technology underpinning Bitcoin and other cryptocurrencies, specifically the "blockchain," also has value and appears to be capable of providing a net benefit for various applications beyond cryptocurrencies. For example, it is widely anticipated that blockchain technology could significantly impact how people execute contracts, record deeds, maintain medical records and so forth.

Challenges with integrating cryptocurrency into an estate plan

The anonymous design associated with cryptocurrency presents significant challenges for estate planning and, ultimately, administering a decedent's estate. Some of the challenges include:

  • There is typically no personally identifiable information associated with an individual's cryptocurrency.
  • Cryptocurrency is a virtual asset that may not be readily identifiable by your loved ones.
  • All crypto transactions require a unique, private key created by the owner. This private key is often referred to as the "golden ticket" enabling someone to spend the cryptocurrency.
  • The owner of cryptocurrency does not put their name or Social Security number on their digital wallet.
  • There is no certificate of title, deed or account statement that can establish ownership of the cryptocurrency.
  • In your typical revocable living trust estate plan, an individual would transfer an asset into the name of their trust thereby allowing their successor trustee to control the asset after the settlor's passing. This cannot be accomplished with a digital wallet containing cryptocurrency.
  • Most other assets in an estate plan feature a third party holding the asset that can be subject to court jurisdiction. This means, in the event an asset is left out of a trust, the mistake can be remedied by filing a petition with a probate court. However, this option is not available in the event your Bitcoin is not incorporated into your estate plan because there is currently no court order that can be filed to recover an individual's private key. This means their cryptocurrency will be lost forever.

Another complicating issue is the fact that Bitcoin, along with other forms of cryptocurrencies, is considered to be a virtual asset that is capable of being stored on a USB thumb drive, a phone a hard drive or anything that is capable of storing data. This creates the serious risk that your loved ones could overlook your Bitcoin assets because they may not know exactly what they are looking at or understand the value of the cryptocurrency.

How to incorporate cryptocurrency into your estate plan

The key to properly passing on your cryptocurrency in accordance with your estate plan is to make sure your estate plan specifically provides for your crypto assets and includes a secure method of transfer for your private key to your heirs, or at the very least the executor of your estate.

The solution may be as simple as including a detailed letter of instruction to your successor trustee with your trust. Another option is to set up a mechanical "dead man" switch that will transfer your cryptocurrency upon your failure to check in after a period of time. The important thing is to work with an experienced estate planning professional to implement a protocol that works for you and your crypto assets.

To help ensure your loved ones are able to actually inherit your cryptocurrency, you need to take the following steps: First, list a specific beneficiary for your cryptocurrency in your will (or trust). Second, provide your heirs or personal representative (successor trustee) with access to information about your digital wallet or wallets. Third, draft a detailed memorandum containing your passwords, private keys and PINs. Fourth, develop a plan to keep the information about accessing your cryptocurrency confidential. Finally, draft a step-by-step guide that explains how to access your cryptocurrency.

Let's address each step in more depth.

Listing beneficiaries for your cryptocurrency in your will

This may seem obvious, but it is nevertheless important to emphasize the fact that you have to actually name specific beneficiaries for your cryptocurrency in your will. Why? Because if an asset you own is not specifically listed in your will, it will fall into the residue (also known as the remainder) of your estate. This is viewed as a general catch-all for your property. The remainder is a collection of everything you own that wasn't accounted for in your will. For tangible property, being lumped into the residue of your estate is manageable. However, when it comes to cryptocurrency, it's almost impossible to discover if there is no roadmap on where to look. If your beneficiaries are unaware that you actually own cryptocurrency, they may never find it if it falls into your estate's residue. To mitigate this risk, take the time to describe your cryptocurrency and name its beneficiaries in your will.

Document the access information for your digital wallets

Along with listing beneficiaries for your cryptocurrency in your will, your personal representatives needs to know where to find your crypto assets. This access information should not be included in your will. If you fail to provide a roadmap on where to locate your cryptocurrency, your loved ones will be forced to look for a needle in a haystack since there are so many different forms of cryptocurrencies and digital wallets. This is why you need to make it clear where your cryptocurrency is actually stored.

If your digital wallet is maintained on a computer, smartphone or requires a specific device to access your cryptocurrency, it is important to actually include these devices in your access documentation so that the key elements of your digital wallet stay together until your beneficiaries can access your crypto assets.

Creating a memorandum to include with your will

You should create a memorandum to accompany your will, instead of listing sensitive login details in the will itself. When you create a memorandum, it provides a level of protection for your login details since it is a separate document that is not actually part of your will. In addition, your separate memorandum typically would not become part of the public record and is a good option to use when you want to maintain a level of privacy regarding your crypto assets.

Another advantage to creating a memorandum is that it can be updated as often as needed without going through the formalities of modifying or updating your will.

When drafting your memorandum, make sure to include the following information:

  • The type of digital wallet(s) you maintain.
  • Any specific computer, smartphone or device where you stored your cryptocurrency.
  • Links to websites for any needed online exchanges or password managers.
  • Login and password information needed for your digital wallets and accounts.

Creating a cryptocurrency access guide

While you may be comfortable accessing and utilizing cryptocurrency, your beneficiaries may not have the same level of comfort or proficiency in managing or utilizing cryptocurrencies. To make it easier for your loved ones to navigate some of the complexities associated with cryptocurrency, consider including a detailed guide that explains how to access your crypto assets. This can be a separate document or can be added to your memorandum that reveals your PINs, private keys and passwords.

When creating this access guide, a good rule of thumb is to assume that your beneficiary knows absolutely nothing about how to access or use cryptocurrency. The access guide should be able to walk a "newbie" to crypto through every step of the process. Like your cryptocurrency memorandum, the access guide can be attached to your will and updated as often as needed.

Leaving cryptocurrency to your loved ones through a trust

In addition to leaving cryptocurrency through a will, you can leave this digital asset through a trust. There are numerous advantages to leaving your cryptocurrency through a trust as opposed to a will. Some of the benefits of using a trust include:

  • Making it less likely that your cryptocurrency will be lost after you pass away.
  • Keeping your cryptocurrency out of probate, which will save your beneficiaries time and resources.
  • Keeping your cryptocurrency private and off the proverbial "grid."
  • Allowing you to leave your cryptocurrency to a person you trust who will be able to access and manage your cryptocurrency, which will relieve your beneficiaries of this task.

Using a trust makes your cryptocurrency known to loved ones

Putting your cryptocurrency in a trust reduces the risk that your cryptocurrency will go undiscovered after you pass away. This is due to the fact that the existence of your cryptocurrency will be made known in your trust documents. This is important because, unlike other property, cryptocurrency is not an easily discoverable asset.

However, when your cryptocurrency is in a trust, it's documented and you've made a plan for what should happen to it when you're dead. Your trust tells your successor trustee that your cryptocurrency exists, where to look for it, and what to do with it. This greatly reduces the possibility that your cryptocurrency will be lost after you die.

Access memorandum should be created for your trust

It is important to highlight the fact that you should not include all of the details of your cryptocurrency in your trust document. Instead, it is recommended to create a separate memorandum that describes in detail how to locate and access your crypto assets. You can leave this "access memorandum" for your successor trustee or whoever will need to access your cryptocurrency after you pass on.

Cryptocurrency in a trust avoids probate

When you die, the law requires (most of) your property to go through a legal process called probate. During this process, your estate is submitted to the court, and your property is distributed to your loved ones either according to the terms of your will or by intestacy laws. This process can still take anywhere from a few weeks to a few months and can be quite expensive, especially if the estate must pay a lawyer or an executor or both.

If you leave your cryptocurrency through your will (or you make no plan at all), your cryptocurrency will go through probate, and your beneficiaries won't have access to your cryptocurrency until the probate process is complete — weeks or months after your death. With the volatile nature of the cryptocurrency markets, your coins could lose tremendous value before your beneficiaries ever get access to your digital wallet while they wait for your estate to be probated.

Any property included in your trust won't go through the probate process when you die. Instead, your successor trustee will immediately have the right to access and distribute your cryptocurrency following the terms of your trust. Keeping your cryptocurrency out of probate will likely save your beneficiaries time and money because they will get access to your coins faster and with fewer court costs.

Trusts keep cryptocurrency private

Another key benefit of utilizing a trust to pass on your crypto assets is that you can maintain a heightened level of privacy for you and your loved ones. If you opt to use a will to pass on your assets, it means you have to go through the public probate process. Probate presents a level of risk and public scrutiny since your will is filed with a court and can become part of the public record. As a result, if you leave your crypto assets through a will, information about your crypto assets are at risk of being viewed by the general public.

The prospect of making your crypto assets available to the general public is unappealing, especially for people who have a fairly large amount of cryptocurrency assets.

In contrast, when you pass on your crypto assets through a trust, there is no public record since you avoid the probate process entirely. This means only your trusted successor trustee will need to know about your cryptocurrency, including your access credentials. This added layer of privacy will help maintain the security of your cryptocurrency for you and your loved ones.

The takeaway on integrating cryptocurrency into your estate plan

Leaving cryptocurrency to your loved ones after your pass away requires thoughtful, detailed planning. If you invest the time and resources to plan now, you can simplify the process for your beneficiaries and ensure they can easily inherit your cryptocurrency. You can provide all of the necessary information on your own, or you can consult an estate planning professional who can provide guidance and advice. One of the most important takeaways is to ensure your loved ones actually know that you own cryptocurrency and that you take the steps to ensure they are able to access your crypto assets.

How do I create an estate plan?

There are numerous options and scenarios to consider when developing an estate plan that protects your legacy and achieves your objectives, and important decisions should be made with the advice of qualified lawyers and financial experts. Membership with Legacy Assurance Plan provides members with valuable resources and guidance to develop comprehensive estate plans that take life's contingencies into consideration and leave a positive impact for generations to come. Legacy Assurance Plan members also receive peace of mind that a team of trusted, experienced professionals will assist them in developing legal, financial and tax strategies that will meet their needs today and for years to come through periodic reviews.

This article is published by Legacy Assurance Plan and is intended for general informational purposes only. Some information may not apply to your situation. It does not, nor is it intended, to constitute legal advice. You should consult with an attorney regarding any specific questions about probate, living probate or other estate planning matters. Legacy Assurance Plan is an estate planning services company and is not a lawyer or law firm and is not engaged in the practice of law. For more information about this and other estate planning matters visit our website at

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