What Happens to Your Crypto if You…Ummm…Die?

Part of the appeal of cryptocurrencies is their inherent anonymity and security. As long as owners know their private key – the permanent password generated upon creation of a new cryptocurrency wallet – their holdings are safe, accessible only to them. Smart crypto owners protect their keys to their digital and physical wallets with the utmost care – a great strategy while living. But what happens to the crypto left behind when you die if no one knows how to access it?

Passing cryptocurrency on to loved ones is unlike bestowing cash, jewelry, or other physical possessions, as detailed in an essay in Quartz’s Private Key crypto newsletter. It’s estimated that 2.3 million to 3.7 million bitcoins have been lost – an amount worth between $15 billion and $24 billion dollars. Once a key is gone, there is no retrieving the assets in a wallet.

But the answer is not as simple as listing a private key in a will. “Wills aren’t designed for confidential information…because a private key is all that’s necessary to transfer funds from a wallet, including it in your will might be a terrible idea,” says the author. This is because wills “become court documents and are generally public…accessible by anyone,” explains Gordon Fischer, an estate planning attorney interviewed for the essay. He recommends trusts, which are “generally private documents,” instead.

Bequeathing crypto assets is a relatively new idea and lacks the well-established processes of passing on physical belongings. Some exchanges, like industry giant Coinbase, ban the ability for letting customers to name beneficiaries, instead “[putting] the burden on heirs to claim any assets left by the deceased.” But Pam Morgan, author of Cryptoasset Inheritance Planning: A Simple Guide for Owners says that proper planning can alleviate most issues. “It’s most important to explain [to family] the kinds of assets, key locations, and access controls you’re using for security,” Morgan told Forbes, including access controls like “PINs, passphrases, [and] multisignature or timelock requirements.” She recommends making multiple copies of asset records, storing each copy in a different place, as well as regularly upholding lists of crypto holdings based on trading activity.

The overall climate is improving – cryptocurrency owners benefit from new laws introduced in 42 states “allowing executors to manage digital assets in much the same way they do traditional holdings of estates”, which are broad enough “to include things that haven’t been invented yet.” With basic advance planning – explaining access controls, listing access records, updating and copying lists of holdings – your cryptocurrency assets can be passed along like anything else instead of being lost forever.
 

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Allana|Expert

Financial analyst and market blogger with expertise in equity research, fundamental analysis, and macroeconomic trends. I regularly publish coverage on individual stocks, ETFs, and sector developments — combining rigorous financial analysis with clear, engaging writing for a broad investment audience.

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