Cryptocurrency requires special strategies for estate planning

by Jade Verity | Contributor 
Jun 29, 2020

Since the advent of Bitcoin in 2009, the use of cryptocurrency has grown exponentially. Today, there are thousands of forms of crypto and digital currencies, with a global market cap exceeding $250 billion. A 2019 survey found that 36.5 million Americans own some form of cryptocurrency, with 61% owning it for investment purposes and around 29% using it for transaction purposes.

The very features that make crypto attractive – anonymity and decentralization – can also increase the risk of your fiduciaries losing access to your crypto holdings. Cryptocurrency, along with other forms of digital assets, should be discussed with your estate planning attorney to ensure that you are minimizing the risks and maximizing the opportunities for these assets to be distributed according to your wishes after your death.

Cryptocurrency is stored in a digital ledger. The ledger is accessed with a private key, which is stored in either an online (hot storage) wallet or an offline (cold storage) wallet. If you lose your private key, there is no customer service number to call or password reset button to press. Without the private key, your crypto is inaccessible and valueless.

How you choose to store your crypto will determine what type of property it is considered and may have implications for how it is transferred under your will or trust.

What type of property is cryptocurrency?

Cryptocurrency is considered personal property, rather than currency, for purposes of estate planning and administration. If the private key for your crypto is held in an online wallet, then it is considered intangible personal property, much like accounts receivable, copyrights or patents. However, if the private key is held on some type of offline storage device, such as a USB drive, then it may be considered tangible personal property, like your clothing or grandma’s china.

Why does it matter whether your crypto is considered personal property? Standard language in wills and trusts might designate certain personal property for specific people – for example, you might specify that your piano should be given to your sister, or your jewelry should be given to your daughter. It is also common to have catchall language that gives all of your personal property to a specific person. That language will automatically include your cryptocurrency (because it is considered personal property), even if you only meant it to include your household furnishings.

How crypto is classified also impacts how it is taxed. Because crypto is personal property, not legal tender, it is taxed in a way that is similar to real estate or stock. When you sell or exchange your crypto, this may lead to capital gains or losses that are reportable on your tax returns. When you use crypto to make a purchase, the IRS sees that transaction as you “selling” your crypto for the value of the item purchased. This tax treatment should be kept in mind when completing personal, gift, trust and estate tax returns.

How will my executor or trustee be able to access my cryptocurrency?

Ensuring proper distribution of any crypto you own at the time of your death can be very simple, but also takes specific planning. In most states, it is a crime to access a computer or other device without specific authorization, so if your fiduciary accesses your computer to attempt to locate or access your crypto account, they are committing a crime unless you have granted them specific authority to do this in your will, trust or power of attorney.

The good news is that your fiduciary will not need a court order to access your crypto wallet. Because a crypto account is essentially a bearer account, accessible by anyone with the private key, your fiduciary will have immediate access to your account if they have your private key. 

The bad news is that your fiduciary will not be able to get a court order to access your crypto wallet. Unlike more traditional types of investment or bank accounts, if your fiduciary does not have the private key, they cannot reset the private key, nor can they petition for a court order to grant them access to your account.

Once your fiduciary gains access to your account, they will need to have your crypto holdings appraised, in the same way that real estate or other personal property is appraised for probate and tax purposes. Your fiduciary will then follow your instructions and either liquidate or distribute your crypto holdings according to your wishes.

Can cryptocurrency be held in a trust?

Trusts may own cryptocurrency, but there are four things to keep in mind if your trust owns crypto:

If you own crypto, or if it is something you might own in the future, here is a checklist of practical tips to help you ensure that your crypto is incorporated into your estate plan.

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 the 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

This article published by:
Legacy Assurance Plan
8039 Cooper Creek Blvd
University Park, Florida 34201
844.306.5272 (Phone) (email)

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