Estate Planning for Cryptocurrency

Investment Strategy | Cryptocurrency

 Jacob Malina By: Jacob Malina

While there are plenty of trendy headlines in the world of investing, one of the trendiest topics over the last few years has been cryptocurrency. Whether you’re in tech, finance, politics, or infrastructure, cryptocurrency is a talking point.

Regardless of your outlook on the asset class, one thing appears to be clear — crypto is likely here to stay. With more and more companies, institutions, and governments taking a serious look at the asset class, it is possible you or someone you know may have sizeable investments in this space.

If you are invested in crypto, have you taken the time to consider how these assets will pass upon your death?

The purpose of this three-part series of blog posts is not about crypto’s merits as an investment. Instead, it is meant to serve as a guideline for those who already hold cryptocurrency and how to properly factor it into your financial plan. 

Over the course of three posts, we will look at high-level planning considerations for these assets across three different disciplines, starting with estate planning.

Holding Crypto Exposure in a Brokerage Account?

What happens to your crypto assets at your death varies widely depending on how they are held. The simplest way to get crypto exposure is by investing in a mutual fund that aims to track the price of a certain virtual currency. If this describes you, you’re potentially already set from an estate planning perspective.

Like most other financial securities held in a custodial/brokerage account (Schwab, Fidelity, etc.), you’ll want to make sure the account is properly titled in the name of your trust, so it is distributed by the terms of your trust at your death. If you don’t have a trust in place, make sure the proper beneficiary designations are on the account so the investment can pass along to who you intend it to. This can usually be accomplished through the custodian’s website, or by filling out a simple form. 

Holding Crypto at an Online Exchange?

This can be trickier, but not impossible. More of the larger exchanges have the ability to add beneficiary designations. BlockFi, for example, allows customers to open an account in the name of a trust and add a beneficiary designation to a non-trust account. Opening the account in the name of your trust allows for several benefits to your estate plan.

if you use an exchange that doesn’t allow for a direct beneficiary designation, be sure to contact the customer service department to find out exactly what happens to your account at death. Many have processes in place to help notify/guide the inheritor of a deceased account owner.

Holding Your Crypto Off-Grid?

One of crypto’s most proclaimed benefits is its decentralized nature, which can also be one of its larger weaknesses from an estate planning perspective.

If you are a serious investor or a miner of crypto, you may use a virtual wallet. 

Hot wallets are applications used to store cryptocurrencies that are connected to the internet. While there are many kinds of hot wallets, none have any sort of automatic beneficiary or trust-titling mechanism. 

This is the same with cold wallets, which are offline methods that can be used to protect your crypto holdings. These are the devices you typically hear about when reading headlines like “early crypto investor loses $200 million of Bitcoin when their flash drive was thrown out.”

Having these off the grid might sound great from a security perspective, but how are your loved ones going to know these assets exist at your death? That’s why having a plan in place for using storage mechanisms like these is crucial.

Here are some things to consider if you hold crypto assets on an exchange without beneficiary options, or if you hold your crypto in a hot or cold wallet:

Update Your Estate Planning Documents

An experienced estate planning attorney can help you create the needed documents or incorporate language into your existing trust that documents the existence of your crypto assets. 

If you don’t have an estate plan in place, there’s no time like the present! Here is a helpful place to start.

Create a Crypto Paper Trail

Create a document/memo to include with your trust documents listing your various holdings, where they are held, and instructions for accessing them. You’ll also want to include any pins, codes, or URLs to access the virtual wallets. This should be a living document, one that you continue to update as your crypto holdings materially change. 

Just make sure you keep this document outside of your will, to avoid it being subject to public record through the probate process.

Appoint a Special Trustee for Your Crypto 

If you hold material wealth in crypto assets, then it might be worth appointing a special trustee for the management of your crypto assets. This is particularly relevant if your current trustee/executor is not tech savvy or lacks a solid understanding of cryptocurrency.

If you appoint a special trustee for your crypto assets, it must be someone you trust completely as they will have full information on how to access those assets. 


Next Steps

Crypto doesn’t leave a paper trail, and for those who hold theirs offline, it can be extremely difficult for loved ones to track down. For the continuity of these assets, it is crucial the proper plan be in place. The proper titling of accounts and beneficiary designations is a great place to start. For the more savvy crypto investors, additional documentation and planning may be needed as part of your estate plan.

Not sure where to start? We can help. Click here to schedule a quick 15-minute consultation with our Family Office team to learn how we help people make these decisions with confidence.



This material has been prepared for informational purposes only and should not be used as investment, tax, legal or accounting advice. All investing involves risk. Past performance is no guarantee of future results. Diversification does not ensure a profit or guarantee against a loss. You should consult your own tax, legal and accounting advisors.

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Originally from the Chicagoland area, Jacob joined Plancorp in 2017. Jacob’s passion for helping clients find the best financial solutions and the challenge of working through complicated financial situations makes him a natural fit for Plancorp. He says he was especially drawn to our firm because of our team-based culture and focus on employee development. More »