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What Happens to Crypto Upon Death if There Is No Will?

Cryptocurrency is still a relatively new concept for not only the general public but for estate planning attorneys and probate courts alike. That said, crypto investors know its value and want to be sure it passes on to their loved ones if something happens to them. However, digital assets such as cryptocurrency are less straightforward regarding inheritance. Therefore it is important as the holder to know what happens to your crypto assets when you die.

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What Is Cryptocurrency?

The Internal Revenue Service (IRS) considers cryptocurrency a digital asset. A digital asset is not “real currency” because it is not coin or paper money of the United States or any foreign country. Cryptocurrency is purchased using a cryptocurrency exchange such as Coinbase, Gemini, or Binance. Using a crypto exchange, you can buy trending cryptocurrencies like Bitcoin, Ethereum, or Litecoin.

Once purchased, cryptocurrencies are typically stored in a digital wallet (or cryptocurrency wallet) to add additional security to the investments. In order to access a digital wallet, you would need to know the account holder’s private key. Without this information, no one can access the digital currency. Investors in cryptocurrency tend to appreciate the added layers of security and anonymity that come with a crypto wallet. Still, that extra protection can backfire if nobody can access the contents when you are gone.

Digital wallets can also be “hot” or “cold.” A hot wallet is connected in some way online. If you store your cryptocurrency on your phone using a digital wallet app, the wallet may be connected to the internet. If that is the case, hackers can access your digital wallet and steal your assets. A cold wallet is entirely offline. Typically, a cold wallet is a data storage device, such as a USB Drive, that you can remove from your computer altogether and prevent someone from accessing your assets.

Knowing what cryptocurrency is can assist a potential investor or beneficiary. As an investor, one of the biggest perks of cryptocurrency is that it is secure. However, it is also one of the biggest pitfalls in the industry. While there are ways to devise traditional assets upon your death, cryptocurrencies are only as good as your ability to access them.

How Is Cryptocurrency Treated in Estate Planning?

Cryptocurrency is not treated as traditional money in terms of estate planning. Typically, you could have a beneficiary designation on a bank account or insurance policy, and upon your death, the assets go to your designated beneficiaries. Crypto, on the other hand, is considered personal property, much like the contents of your home. It is important to know that cryptocurrency is personal property. In standard wills and trusts, you may name a residuary beneficiary to inherit all your personal property (including crypto), but that may not be the person you want to receive your crypto assets.

Additionally, because cryptocurrency is considered personal property, it is subject to different estate taxes. Cryptocurrency is treated similarly to stock or real estate. When your beneficiary attempts to sell the stock, they may have to deal with capital gains or losses.

Who Inherits Cryptocurrency if There Is No Will?

If you or a loved one die without a will and have cryptocurrency assets, the property passes according to your state’s intestacy laws. In most states, if you are married and have no children, your spouse will inherit everything. If you have children but no spouse, your children will inherit everything. The percentages of what your heirs receive under intestacy laws vary by state.

While the state intestacy laws dictate who inherits the cryptocurrency, it does not help them access it. As mentioned above, knowing the private key is the only way to access a digital wallet. Unlike a bank account, you cannot reach a representative of a cryptocurrency exchange and produce a death certificate of the true account holder to prove they have passed away. Because the security of crypto assets is tight, there will be nobody to assist in accessing the account. In short, if a crypto investor dies without a will and without providing instructions on how to access their crypto assets, those assets are lost forever. Despite the intestacy laws, because cryptocurrency is considered personal property, the only way to exchange the assets for value is if your personal representative or beneficiary has access to them.

How To Ensure Your Beneficiaries Inherit Your Cryptocurrency

First and foremost, if you have assets you wish to pass to family members or loved ones following your death, you should create a last will and testament that details your wishes. If you do not have a will and want to make one, you can use Findlaw’s Do-It-Yourself Estate Planning Forms to get started.

However, having a will and naming who you want to inherit your crypto after you die is not the only step in ensuring your digital assets are accessible. First, consider naming a personal representative who is tech-savvy enough to know how to utilize a cryptocurrency exchange and a digital wallet. Your personal representative is the person who the court will appoint to manage your estate during the probate process. If your personal representative does not know how to access digital assets, they may need to hire an estate planning attorney to assist them.

Additionally, you want to keep your private key and digital asset information private in any legal document, including your will. During probate, your will becomes a part of the public record, and the information listed in your will could be used to access your digital assets. Instead, consider listing your digital assets, any digital wallets you have, and any private keys on a separate document and storing them in a safe deposit box or fireproof safe. You can include instructions on how to access your assets and ensure your relevant information is in one place.

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Written by:

Mathew Courtney, Esq.

Contributing Author

Reviewed by:

Catherine Hodder, Esq.

Senior Legal Writer