The world of “cryptocurrency”, “Bitcoin”, and “NFT” can seem complicated. But these assets are quickly becoming a popular way for people to try and accumulate wealth. The problem with this new form of investment is that it makes it more difficult to make sure your crypto assets go to your loved ones when you die.
Cryptocurrency 101
For those still new to the concept, cryptocurrency is an asset similar to cash but it is not represented by coins or bills. It is a digital currency that only exists online. Picture a secure online public ledger (called a blockchain) that lists a person’s investment. The ledger is encrypted so no one can change it or tamper with it. People can transfer, buy, and sell cryptocurrency through secure online accounts, called “digital wallets,” using a private key.
Why Is Estate Planning for Cryptocurrency Difficult?
Cryptocurrency is not a traditional asset like coins or gold bars, but an intangible asset that can only be accessed online with a private key. Therefore, leaving cryptocurrency to your beneficiaries, along with other digital assets, involves proper planning.
Because cryptocurrency is a relatively new type of asset, there are many common mistakes that can prevent your crypto wealth from being passed on to your beneficiaries.
Mistake #1: Not Maintaining a Cryptocurrency Inventory
If you do not have a proper record of your cryptocurrency assets, your personal representative or executor will not know how much you own and where to gain access to it.
In the same way you inventory what real estate and tangible assets you own, such as contents of your safe-deposit box, make a record of all your digital currency. This would include any Bitcoin, Ethereum, Binance or tokens. You should also include any NFTs (non-fungible tokens).
Solution: List the asset (bitcoin, ether, or other token), the number of units or tokens, and the date and market value when you purchased these assets. Also include who manages the cryptocurrency exchange, such as Coinbase, and where to find the password. Keep this list in a secure location such as a safe deposit box, personal safe, or online cloud storage with a password.
Mistake #2: Forgetting Passwords to Your Digital Wallets
Passwords to crypto assets are stored in digital wallets. Digital wallets can only be accessed with a private key, called a seed phrase or a password.
A digital wallet can be either “hot” or “cold." A “hot wallet” is typically a software app or web-based program connected to the internet where you can store your private keys. A cold wallet, called a hardware wallet, stores private keys in offline storage (such as a USB drive). A cold wallet is more secure because it is not connected to the internet.
Due to the security design of the digital wallet, if you lose your private keys, you cannot access your digital assets. This is a huge issue, and it is estimated that crypto investors have lost access to more than $400 billion in Bitcoin.
Solution: Create password managers and share only with trusted individuals such as your digital executor. Leave clear instructions on how to access your digital wallets and private keys.
Mistake #3: Not Addressing Digital Assets or a Digital Executor in Your Will
Crypto currency is an asset, and as such it should have a designated beneficiary. Crypto exchanges typically do not have beneficiary forms or transfer-on-death designations. This means when you pass, your crypto assets become a part of your estate and goes through probate. If you do not identify a specific beneficiary for those assets, it goes into your residuary estate to be distributed among your heirs.
Under the Revised Uniform Fiduciary Access Digital Assets Act (RUFADAA), personal representatives or executors can only get access to your digital assets if it is stated in your will. Most states have adopted this act in part or made it part of their own code.
Solution: Identify your digital assets including cryptocurrency and NFTs and name beneficiaries for those assets. Nominate a person as your digital executor (this can be your executor or personal representative) to handle your digital assets.
Mistake #4: Not Understanding Estate Taxes
When you die, your estate goes through probate to determine your assets and net worth. This includes bank accounts, investment accounts, and crypto assets. If you have an exceptionally large estate, your estate may have to pay federal and/or state estate taxes.
Federal Estate Tax: For taxable estates exceeding $13.99 million in 2025, the federal estate tax is 40%.
State Estate Tax: Connecticut, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont, and Washington and the District of Columbia impose a state estate tax.
Solution: Know your potential federal and state estate tax liability. If you have a significant estate, talk to a tax or estate planning attorney about gifting options or creating irrevocable trusts to reduce your taxable estate.
Avoid These Mistakes
Consider consulting a lawyer who is knowledgeable in crypto estate planning. They will draft estate planning documents to handle your crypto holdings and all your digital assets; help you identify a digital executor, determine estate tax liability and suggest options to reduce estate taxes, and ensure your assets won’t be lost.
Related Resources
- How Do You Include Cryptocurrency and NFTs in a Will? FindLaw Estate Planning Basics
- What Is Digital Estate Planning? FindLaw Estate Planning Basics
- The Ultimate Guide to Planning Your Digital Estate FindLaw Estate Planning Basics
