You can have a living trust, name your beneficiaries, and carefully plan what happens to your property when you’re gone.

But what happens if your family can’t unlock your crypto wallet?

Or they know you owned Bitcoin but have no idea where you kept it?

That’s where traditional estate planning can run into problems with digital assets. With real estate, your heirs can find the property. With a bank account, they can usually work through the bank. But cryptocurrency, online businesses, domains, email accounts, and other digital assets can create another challenge: access.

Your estate plan needs to designate who has the legal right to your digital assets and provide that person with a practical way to locate and access them.

Here’s how I recommend approaching estate planning for digital assets, especially if cryptocurrency makes up a meaningful part of your estate.

Key Takeaways

• Estate planning for crypto investments or digital assets requires you to plan for both legal ownership and practical access.
• Your living trust should give your successor trustee appropriate authority over your digital assets.
• Never put cryptocurrency seed phrases, private keys, or other sensitive credentials directly in your will.
• Platform tools such as Google’s Inactive Account Manager and Apple’s Legacy Contact can help your family access certain accounts.
• Investors with significant crypto or digital business assets may consider holding appropriate assets through an LLC owned by a living trust.
• Crypto investors should create secure instructions that tell their heirs where to find their assets and access information.
• Keep transaction and tax records so your heirs have the information needed to establish the value and tax basis of inherited cryptocurrency.
• Maintain a digital asset inventory and update your Emergency Binder as your accounts and investments change.

Want to learn how to pass bitcoin to heirs, or looking for more estate planning tips? Watch my video and subscribe to my YouTube channel.

Why Do Digital Assets Need Their Own Estate Plan?

Digital assets create a unique problem because transferring legal ownership doesn’t guarantee access.

Your living trust may say exactly who inherits your Bitcoin. But if your heirs can’t find your digital wallet, private keys, or recovery information, those instructions won’t get them far.

That’s why estate planning for cryptocurrency needs to address three things:

1. Authority: Does your successor trustee have the legal right to manage your crypto?
2. Access to digital assets: Can they get through private keys, PINs, passwords, or two-factor authentication?
3. Records: Do they know what you own, where you hold it, and where to find the information they need?

The Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA), adopted in most states, provides a legal framework governing when fiduciaries, such as trustees and executors, can access and manage digital assets. But that authority doesn’t automatically grant them access to your passwords, private keys, or other credentials. Your estate documents and access strategy still need to work together.

Cryptocurrency estate planning isn’t just about deciding who inherits your assets. Your estate plan determines who gets them. Your digital plan gives that person a map to find and access them.

What Digital Assets Should You Include In Your Estate Plan?

Digital assets have become an increasingly important asset class, and your estate plan should account for any valuable digital property and online accounts your family members may need to access, such as:

• Bitcoin and other cryptocurrencies
• Crypto wallets and exchanges
• NFTs and other blockchain-based assets
• Email and cloud storage
• Domain names and websites
• Monetized YouTube channels
• Social media accounts
• Online businesses
• Digital intellectual property
• Financial and investment accounts

Don’t treat every digital asset the same way. You may own Bitcoin as property, while access to an online account may depend on that platform’s rules.

Your estate plan needs to account for those differences.

How Can Your Heirs Access Your Online Accounts?

Start with the legacy tools offered by the platforms you use.

Google’s Inactive Account Manager lets you designate trusted contacts and determine what happens to certain account information after a period of inactivity.

Apple’s Legacy Contact allows you to designate someone who can request access to certain data associated with your Apple Account after your death.

For accounts that allow beneficiary designations, make sure you name a beneficiary and keep the designation current. A beneficiary designation can control how certain assets transfer, so it should coordinate with your trust and the rest of your estate plan. 

Review your important accounts now. If a platform allows you to designate a legacy contact or establish another succession method, use it and align that choice with your estate plan.

How Do You Pass Cryptocurrency To Your Heirs?

Passing cryptocurrency requires both a legal inheritance plan and a secure access plan. Here’s how to do it:

1. Include your crypto in your estate plan. Identify who should inherit it and give your successor trustee the appropriate authority to manage and transfer it.
2. Create a crypto inventory. List the cryptocurrencies you own, where you hold them, and the wallets or exchanges your successor needs to know about.
3. Secure your access information. Store seed phrases, private keys, PINs, and recovery information securely. Don’t put them directly in your Will or trust.
4. Plan for authentication. Determine how your executor or trustee will handle two-factor authentication, hardware devices, recovery methods, and other security measures.
5. Leave instructions. Tell your successor where to find the information they need and identify someone who can provide technical help if necessary.
6. Keep everything current. Update your inventory when you change wallets, exchanges, devices, or significant holdings.

You don’t need to give your heirs unrestricted access while you’re alive. Create a secure path that gives the right person control once they have the legal authority.

Should You Use A Multi-Signature Wallet?

A multi-signature wallet can provide additional security for significant cryptocurrency holdings.

Instead of relying on one key, a multisig wallet requires multiple keys to authorize a transaction. A 2-of-3 arrangement, for example, requires two of three available keys.

That can eliminate a single private key as a point of failure and create another way to plan for succession.

But don’t make your plan unnecessarily complicated. Your heirs need to be able to execute the system you’ve created.

Where Should You Store Crypto Access Information?

Keep sensitive access information secure, but make sure your family knows how to find it.

A wallet hidden in a drawer doesn’t help if nobody knows it exists. Neither does a seed phrase stored somewhere only you know about.

Your successor should know:

• What digital assets you own
• Where you hold them
• Where to find access instructions
• Who can provide technical help
• When they have the legal authority to take control

Think of this as separating the map from the key. Your estate plan and inventory can show your successor where to go without exposing your private keys or seed phrases.

What Happens To Cryptocurrency Taxes When Someone Dies?

Inherited cryptocurrency may receive a new tax basis based on its fair market value at the owner’s death under the general rules for inherited property.

For example, assume you purchased Bitcoin for $500,000 and it’s worth $1 million when you pass away. If your beneficiary receives a $1 million basis and sells around that value, the $500,000 of appreciation during your lifetime generally wouldn’t create the same capital gain you would have recognized by selling before death.

That’s why records matter.

Keep transaction histories, exchange records, ownership information, and other documentation that can help establish what you owned and its value.

The IRS has also expanded digital asset reporting through Form 1099-DA. Good recordkeeping should be part of your planning, not an afterthought.

How Do You Create A Digital Asset Inventory?

Your digital asset inventory should tell your successor what you own, where you hold it, and where to find the instructions needed to access it.

Include important financial assets and accounts, such as cryptocurrencies, wallets, exchanges, online businesses, domains, email, cloud storage, and other financial accounts.

For each one, identify:

• What it is
• Where it’s held
• How it’s owned
• Where your successor can find access instructions

Don’t put private keys and passwords in an unsecured inventory.

The inventory is the map—not the key.

Why Should You Create An Emergency Binder?

An Emergency Binder gives your successor trustee a central place to start.

It can identify your estate documents, LLCs, real estate, traditional assets, insurance, advisors, digital assets, and the location of important access instructions.

This becomes especially important with digital assets because there may be nothing physical for your family to find.

Review your Emergency Binder annually and update it whenever your assets or accounts change.

Frequently Asked Questions About Digital Estate Planning

Can Cryptocurrency Be Inherited?

Yes. Cryptocurrency can pass to beneficiaries, but your plan needs to address both inheritance and access. With self-custodied crypto, your heirs may be unable to access the assets without the necessary private keys or recovery information.

Can Digital Assets Go In A Living Trust?

Yes. A properly drafted living trust can establish who controls and inherits your digital assets. Your trust should provide the appropriate legal authority while a separate, secure system handles passwords, private keys, and other access information.

Should You Put Your Crypto Seed Phrase In Your Will?

No. A Will goes through probate and can become part of the public court record. Keep seed phrases, private keys, and other sensitive credentials separate from your estate planning documents, such as in a safe deposit box.

Can An LLC Help Pass Digital Assets To Your Heirs?

Yes, depending on the asset. An LLC owned by your living trust may provide continuity for certain cryptocurrency, online businesses, domain names, and other digital assets. Control of the LLC can transition in accordance with your trust and operating agreement while the LLC continues to exist.

However, exchanges, custodians, and online platforms may have their own ownership and succession requirements. You’ll want to work with a qualified estate planning attorney to set up transfers through an LLC.

How Often Should You Update Your Digital Estate Plan?

Review it at least once a year and whenever you make a significant change, such as opening a new wallet, changing exchanges, acquiring significant digital assets, or updating your estate plan.

Don’t Leave Your Family A Digital Puzzle

Your assets have changed. Your estate plan needs to change with them.

A living trust can establish who receives your cryptocurrency and digital assets, but that’s only part of the job. Your heirs also need a secure way to locate and access those assets when the time comes.

Give your successor the appropriate legal authority. Create a digital asset inventory. Secure your access information. Keep your records current.

Most importantly, work with a qualified law firm to create an estate plan that addresses your digital assets while you’re still here to make sure everything works the way you intend.

At Anderson Advisors, our estate planners help investors build safeguards around the assets they actually own, including cryptocurrency, businesses, real estate, and other investments. When you schedule a 45-minute Strategy Session, we can help you create an appropriate plan to ensure that your loved ones can gain access and pass on your assets the way you intended.