Can You Legally Pass on Cryptocurrency or NFTs in a Will?

What Are Cryptocurrency and NFTs?

Cryptocurrency is a decentralized digital currency (not backed by a financial or government entity). As people create and trade crypto online, the transactions are recorded on a blockchain, which is essentially a verified public ledger. While Bitcoin is probably the most well-known, there are many different types of cryptocurrencies, such as Ethereum, Binance, Litcoin, and Tether. Cryptocurrencies’ value is volatile because it is influenced by supply and demand, among other factors. That said, crypto may be a good investment for people who understand the market and buy and sell accordingly.

NFTs (non-fungible tokens) are digital collectibles in the form of art, photographs, social media posts, music, and other pieces of intellectual property. NFTs are based on blockchain technology and have a unique digital identifier, which tells the world who owns the original version of a digital file. So, while internet users can copy and download regular digital files an infinite number of times, only one person can own the NFT at any one time. Certain NFTs (particularly digital art) are extremely valuable or may become valuable over time, which is why many people see them as investment opportunities.

Why Are Cryptocurrency and NFTs Treated Differently in Your Will?

Giving a coin or stamp collection to a beneficiary is easy because it is tangible. The intangible nature of cryptocurrency and NFTs make it more difficult to pass on to others. Cryptocurrency and NFTs cannot be accessed or transferred without a private key, password, or other login information. If you die without telling your loved ones or fiduciaries where to find and how to use your access information, you risk losing your cryptocurrency and NFTs forever.

How To Pass Cryptocurrency and NFTs in Your Will

If you spent time and money exchanging crypto, NFTs, or both, you likely want to make sure you can pass these digital assets to your beneficiaries when you die. You should take a few steps to ensure that your executor (or personal representative) and beneficiaries know about your cryptocurrency and NFTs, where to locate them, and how to access them per your wishes after you die.

Include Your Digital Assets in Your Will

The best way to make it known that you have crypto or NFTs you want to pass on is to say so in your will. Referencing these digital assets and naming beneficiaries helps to avoid confusion and expedites the probate process. It also alerts your family members and loved ones about your assets and your intention to pass them along after you die. If you do not list your crypto assets or NFTs in your will, these assets fall into the “residue” of your estate, which is all the leftover property not explicitly given away in your will. Because these assets are not physical, and if no one else (such as your fiduciary) knows they exist, your heirs can’t discover them.

While you should reference your crypto and NFT assets in your will, it is equally important not to list your passwords, private keys, and other login credentials. Because a will becomes a public record when it goes through probate, you don’t want just anyone accessing your digital assets. The next step (discussed below) explains how to secure your crypto and NFTs while also enabling your executor and heirs to access them after your death.

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Create a Separate Memorandum With Access Information and Instructions

Once your heirs know (from your will) that you have crypto and NFT assets you want to pass along, they need to know how to access them. The next step is creating a memorandum which is a document kept separate from your will and does not become a public record. The goal of this document is to securely give your loved ones access to your online accounts and digital wallets (more on this later) and leave instructions for them to access and use the digital assets they inherit from you.

Your memorandum will vary depending on which form of crypto and how many NFTs you own. Your memorandum should include the following:

• A list of the cryptocurrency and NFTs you own: It is a good idea to list all of the crypto and NFTs you own and be as specific as possible. For example, list what you own (Bitcoin, Ethereum, or Tether) and the number of shares you own. Think of this list as your digital legacy, containing all the digital assets you have acquired and want to pass on after your death.
• Where to find the digital assets: If you own crypto or NFTs, you likely store them in one or more digital wallets. Digital wallets allow you to store and manage these assets in one place, such as a smartphone, app, computer, or even a USB drive. Be sure to include a list of the types of digital wallets you use and the assets stored in them.
• Website links to online exchanges: An exchange is an online marketplace where people buy and sell cryptocurrencies (Coinbase, Gemini, and Robinhood) and NFTs (OpenSea and Rarible). You should include the cryptocurrency exchanges and NFT marketplaces you use so your beneficiaries can access and exchange the crypto and NFTs they inherit from you after your death.
• Login credentials: Your heirs cannot access your digital assets without the necessary login information. In your memorandum, list the usernames, private keys, passwords, and PINs they need to login to your digital wallets, exchanges, and accounts.
• Instructions: Chances are some of your beneficiaries are unfamiliar with the world of digital currency and NFTs. What is the point of leaving digital assets to your loved ones if they don’t know what to do with them? You should leave your personal representative and/or beneficiaries detailed instructions, so they aren’t left frustrated trying to figure out what Bitcoins and blockchains are on their own. A good set of instructions should not only guide them through the process of accessing your digital accounts and wallets but also teach them how to buy and sell their new digital assets on exchanges.

Appoint a Tech-Savvy Executor

An “executor” or “personal representative” is the person you appoint in your will to distribute the property in your probate estate when you die. While the process for asset distribution is pretty straightforward for traditional assets, distributing digital assets can be tricky if your executor doesn’t possess certain technical skills. For example, suppose you want to name beneficiaries to receive the value of your Ethereum or NFT instead of receiving the digital asset itself. In that case, your executor must know how to sell your crypto or NFTs for regular cash on an exchange.

Another option is to name a digital executor who is different from your will executor. This person will be solely responsible for finding, managing, and distributing your digital assets after your death but won’t take part in administrating your probate estate.

Whoever you name as your executor or personal representative, tell them where to find the memorandum with your access information and instructions. You may state this in your will, but you may prefer to let them know the instructions before you die.

Update Your Memorandum Regularly

As you buy and sell crypto and NFTs, update your memorandum to reflect these changes. If you acquire new forms of cryptocurrencies but don’t add them to your list, your fiduciary and beneficiaries may not know they exist or how to access them. You must also update your memorandum every time you change a password, key, username, PIN, or other login information on your online accounts and digital wallets.

Ready To Add Cryptocurrency and NFTs to Your Will?

With the proper estate planning documents in place, gifting digital assets to your loved ones in your will usually is a simple process. Using a last will and testament form allows you to add and customize a provision that references your cryptocurrency and NFTs, names your beneficiaries, and tells your executor where to locate the memorandum with your access information and instructions. For more complex digital estates, the do-it-yourself approach may not be appropriate. If you still have questions or concerns about adding crypto and NFT assets to your will, consult an estate planning attorney who is well-versed in these technologies.