What Happens to Your Crypto Assets When You Die?
Bitcoin, NFTs, Dogecoin – all forms of cryptocurrencies have gained buzz with investors. But unless you have a specific plan for them in your will, your crypto assets could disappear forever when you die.
The popularity of cryptocurrency has exploded in recent months, with its market cap peaking at $3 trillion in 2021. For those who have invested in cryptocurrency, this novel asset can represent a confusing but potentially exciting new world, where government regulation and industry best practices are either nonexistent or struggling to keep up. But even if crypto is a novel investment for you, it’s important to think long-term — and that includes preparing for what should happen to your crypto when you pass away.
Cryptocurrency, or crypto, is a form of digital currency. Instead of being managed by a centralized authority (like a bank), crypto transactions live on an immutable public ledger called a blockchain and are independently verified by a network of computers.
Because crypto assets are decentralized, it’s extremely important that you include them in your estate plan, and choose someone you trust to execute that plan. Otherwise, it may be impossible for your beneficiaries to secure access to them when you pass away.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Why should you include crypto in your estate plan?
Like your real estate property and other possessions you own in your name, crypto is considered a probate asset. This means that it has to go through probate (the legal and court-driven process of distributing your estate) before it can be legally transferred to your beneficiaries after you die. Having an estate plan generally makes the probate process quicker and easier for everyone involved.
Also, note that even the most popular crypto exchanges don’t currently support any type of beneficiary designation for crypto assets — such as transfer on death (TOD) or payable on death (POD) accounts — which are common ways to keep traditional assets out of probate.
In addition, because of its decentralized nature, crypto has some unique safety concerns that aren’t an issue with assets managed by a centralized authority (like bank or investment accounts). Even though crypto is a digital currency, you should treat it like a physical asset with value, akin to diamonds, precious metals or cash. Anyone who gains access to your crypto can use it — for better or for worse. Conversely, if you die without giving someone access to your crypto keys — the strings of randomly generated numbers and letters that serve as your crypto “passwords” — your crypto is likely gone forever, locked in a digital wallet that can’t be accessed.
Because of this, it’s imperative you make a plan for your crypto assets and leave clear instructions for the people you want to inherit them.
Best practices for passing on your crypto assets
1. Name a beneficiary for your crypto assets in your estate plan.
A beneficiary is the person or organization you want to inherit an asset when you die. Make sure to list all your crypto assets in your estate plan, where they’re stored, and which beneficiaries should receive them.
In addition to naming beneficiaries for your crypto assets in your will, you should also name an executor: the person you appoint to administer your last will and testament. You could also name a separate digital executor and task them with protecting and preserving your digital assets and digital property. To make the process easier for everyone involved, consider nominating an executor or digital executor who is familiar with crypto. (
If you plan to name co-executors in your will, consider choosing individuals who get along and work well together, and delineate their responsibilities clearly in your will so there isn’t any confusion.
As new laws and regulations transform the landscape, revisit your estate plan frequently to ensure that your nominated executor is well-equipped to access and oversee your crypto investments and facilitate their transfer to your chosen beneficiaries without unnecessary cost and delay.
2. If you own large amounts of crypto, consider establishing and funding an irrevocable trust.
If your estate is valued above a certain threshold, it could be subject to estate tax when you die. The current federal estate tax exemption is $12.06 million for individuals and $24.12 million for married couples. A handful of states also impose a state-level estate tax (the lowest threshold being in Oregon and Massachusetts, currently at $1 million).
If you own enough crypto that your estate could be subject to estate tax, you may want to consider establishing an irrevocable trust. A properly structured irrevocable trust can remove these valuable assets from your taxable estate. However, as a general rule, the crypto you transfer to an irrevocable trust during your lifetime won’t receive a basis adjustment (or step-up in basis) when you die.
3. Understand and document where your crypto is stored.
How your executor and beneficiaries will retrieve your crypto after you die depends on how you store it.
If your crypto is stored in a custodial account on a crypto exchange like Coinbase, Gemini or eToro, your executor or beneficiaries can contact these exchanges directly to facilitate the transfer of your assets. To start this process, they will need to provide your death certificate, probate documents (such as a copy of your will), proof of identification, and a letter signed by the executor instructing what to do with the crypto in the account.
If your crypto is stored offline in a cold wallet (a physical storage device that often looks like a USB drive), posthumous access will depend on how well you document your assets. Here are some generally accepted best practices:
- Document the location of the wallet itself (ideally stored in a fireproof safe or safe deposit box).
- Document your private and public keys for each wallet you own. Both are needed to access your crypto. Keep both keys in secure but separate locations.
- Document any other information that may be needed to access your wallet, like a PIN code or recovery phrase.
Where you ultimately store this information is up to you. You may consider keeping it in a safe deposit box, listing it in your estate plan, or entrusting it to an attorney, family member or friend.
Even though the crypto landscape is evolving rapidly, having an estate plan is critical to protecting your crypto assets when you die. Because of the decentralized nature of crypto, the onus is on you to keep stock of your investments and communicate access instructions to your executor and beneficiaries in the event you pass away.
Having an up-to-date estate plan is important for everyone, but it can be especially critical for crypto owners who don’t want their loved ones to lose access to their crypto assets.
-
The Rule of Compounding: Why Time Is an Investor's Best FriendDescribed as both a "miracle" and a "wonder," compound interest is simply a function of time.
-
4 Great Tools to DIY Your Own Financial PlanSmart Savings Several tools picked out by Kiplinger that DIYers can use to make their own financial plan.
-
The 7-Month Deadline That Sets Your Lifetime Medicare PremiumsUnderstanding Medicare enrollment is crucial, as missing deadlines can lead to permanent late enrollment penalties and gaps in coverage.
-
If You're a U.S. Retiree Living in Portugal, Your Tax Plan Needs a Post-NHR Strategy ASAPWhen your 10-year Non-Habitual Resident tax break ends, you could see your tax rate soar. Take steps to plan for this change well before the NHR window closes.
-
Your Year-End Tax and Estate Planning Review Just Got UrgentChanging tax rules and falling interest rates mean financial planning is more important than ever as 2025 ends. There's still time to make these five key moves.
-
What Makes This Business So Successful? We Find Out From the Founder's KidsThe children of Morgan Clayton share how their father's wisdom, life experience and caring nature have turned their family business into a respected powerhouse.
-
Past Performance Is Not Indicative of Your Financial Adviser's ExpertiseMany people find a financial adviser by searching online or asking for referrals from friends or family. This can actually end up costing you big-time.
-
I'm a Financial Planner: If You're Not Doing Roth Conversions, You Need to Read ThisRoth conversions and other Roth strategies can be complex, but don't dismiss these tax planning tools outright. They could really work for you and your heirs.
-
Could Traditional Retirement Expectations Be Killing Us? A Retirement Psychologist Makes the CaseA retirement psychologist makes the case: A fulfilling retirement begins with a blueprint for living, rather than simply the accumulation of a large nest egg.
-
I'm a Financial Adviser: This Is How You Can Adapt to Social Security UncertaintyRather than letting the unknowns make you anxious, focus on building a flexible income strategy that can adapt to possible future Social Security changes.
-
I'm a Financial Planner for Millionaires: Here's How to Give Your Kids Cash Gifts Without Triggering IRS PaperworkMost people can gift large sums without paying tax or filing a return, especially by structuring gifts across two tax years or splitting gifts with a spouse.
