Basics of Estate Planning with Cryptocurrency

By, Lydia Mrowiec, Elder & Disability Law Clinic Student, Fall 2022 

Although the crypto market has been hit hard, cryptocurrency and its future are not dead.[1] 

What is cryptocurrency?

Cryptocurrency is any form of digital currency that uses cryptography to secure transactions and uses a decentralized system to record transactions and to issue new currency units.[2]  This means the currency isn’t central to a bank or authority.[3]  Some examples are: Bitcoin, Ethereum, Litecoin, and Ripple.[4]  What makes cryptocurrency unique, and especially challenging for estate planning, is that there is no personally identifiable information associated with the currency.[5]  The crypto is held in a virtual wallet that has a public key (needed to transfer cryptocurrency to the wallet) and private key (owned only by the individual).[6]  The only way to access someone’s crypto account is by using their password to unlock their virtual wallet.[7]  Unlike other assets you may own, like a car, house, or stocks, which are titled under your name, because crypto is not, full virtual wallets are often lost forever when someone dies without a plan in place.[8] 

For federal tax purposes, cryptocurrency is treated as personal property and taxed like stocks.[9]  The results of trading and selling crypto are taxed the same as capital gains and losses and must be reported on tax returns.[10]  Other state and federal regulations for cryptocurrency are still in the works,[11] and the SEC has been pushing for strict securities regulations of cryptocurrency.[12]  Because of the varying and emerging state and federal laws surrounding cryptocurrency, it is important to research your state specific laws for cryptocurrency when planning.[13]

How to Plan

Just like stock, cryptocurrency can be transferred under will or by trust, but assignment is not enough like it is for the transfer of other assets.[14]  If transferring under will or by trust, you must provide your executor, the beneficiary, or trustee with your private and public keys so that they can access your virtual wallet.[15]  This can simply be done by creating physical documents with information about your virtual wallet (where it is, how to access it, and your password) and storing the documents in a secure location.[16]  If your beneficiary decides to liquidate your virtual wallet, there will be tax consequences, just as if they had liquidated a stock portfolio.[17]

One advantage of cryptocurrency is that a death certificate or letters testamentary do not need to be presented in order to access your virtual wallet; the successor just needs the access key.[18]  However, if your virtual wallet is stored on a USB drive, the drive itself could be considered part of the probate estate as tangible personal property and subject to the probate process.[19]  To avoid this, you might consider assigning the USB drive to a limited liability company during life, so that the virtual wallet can pass outside of probate.[20]

Another consideration with cryptocurrency and your estate planning is your financial power of attorney.  Although your agent should be able to access your virtual wallet by providing them with the necessary information, it is an added safeguard to include managing your digital assets/cryptocurrency accounts as one of their powers under your power of attorney.[21]

[1] See Gillian Tett, Crypto’s Future May Be Divided, Not Dead, Financial Times (Nov. 10, 2022),

[2] What Is Cryptocurrency and How Does It Work?, Kaspersky,

[3] See Megan DeMatteo, What Happens to Your Crypto When You Die? Make a Plan or Lose Your Investment Forever, TIME: NextAdvisor (Feb. 17, 2022),

[4] Kaspersky, supra note 2.

[5] See Allison L. Lee, Estate Planning: What Happens to Your Cryptocurrency When You Die?, Kiplinger (Mar. 21, 2022),

[6] See James H. Cundiff & Elise J. McGee, Estate and Custody Planning For Cryptocurrency, Trusts & Estates, Apr. 2022, at 14.

[7] See DeMatteo, supra note 3.

[8] See id.

[9] See Matt E. Kirk, Planning for the Future: Estate and Tax Planning with Digital Assets, Holland & Knight (June 10, 2022),

[10] See id.

[11] See Cundiff & McGee, supra note 6.

[12] See Kirk, supra note 9.

[13] See Cundiff & McGee, supra note 6.

[14] See Kirk, supra note 9.

[15] See DeMatteo, supra note 3.

[16] See id.

[17] See Kirk, supra note 9.

[18] Id.

[19] See id.

[20] Id.

[21] See id.