Six Simple Steps to Estate Plan for Your Bitcoin

Even though bitcoin is experiencing some volatility, we believe it’ll go to $500,000 in the coming years.

That’s nearly 10x upside from today. It also means that even a small amount of bitcoin can turn into a fortune.

So if you own bitcoin (or any crypto), you need to start thinking about what will happen to it after you pass.

According to top estate-planning advisers for crypto assets, when it comes to estate planning, you should treat crypto like any other asset…

When someone passes away, there’s a process of discovering what they own.

In the past, you might look through their mail for bank and brokerage statements. But since we usually hold crypto in private wallets, there’s no paper trail.

This raises three important questions:

How do you discover the assets? Crypto is digital, and online assets are particularly difficult to discover. If you don’t have the password to a computer, you won’t be able to discover what’s online, in a file, or elsewhere.

Who owns the assets? Is it an individual, a trust, or something else that owns the digital assets? Many people will use a trust to avoid probate (the often-lengthy process of proving a will is valid).

Who has access? You need the legal authority to start handling someone else’s assets after their death. If you don’t have it, you could be violating federal law.

If an heir can’t answer these questions, they’re out of luck. They can’t access the bitcoin or crypto.

That’s why you need a plan.

Six Steps to Estate Plan for Your Bitcoin

Here’s a general guide to help make sure the discovery, ownership, and access process isn’t a dead-end for your heir(s):

Have a will. Clearly stating how to distribute your assets and property is the easiest way to ensure nothing is lost.

Consider a trust or LLC. This can protect your crypto assets from estate taxes and other financial liabilities, leaving more to your heirs. If you have cold wallets not listed in your will, trust, or LLC, have a document with instructions on finding and accessing them.

Choose executors or trustees that understand crypto. Since we hold crypto differently than cash, choose someone who understands how it’s traded and held. This may require having a separate crypto-executor or crypto-trustee.

Record and secure your crypto wallet details. Although it’s often best to avoid writing down seed phrases and passwords, having physical copies of your credentials is something to consider. You can hold the paper copy in a secure file cabinet, a safety deposit box, or some other offline location.

Understand the limits on your crypto accounts. For instance, most crypto custodians only allow individual accounts without TOD (transfer on death). But as the crypto market grows, more options will become available.

Keep your estate plan up to date. You need to account for any major life changes like weddings, divorces, births, adoptions… new accounts… new passwords, etc. Staying on top of these things will lessen the burden on your loved ones.

This guide is just a starting point. But these six steps should get you thinking about how to ensure your cryptos get in the hands of your intended heirs.

Note: Every individual’s financial situation is unique. So if you’re serious about proper estate planning, we strongly encourage you to consult a financial adviser, attorney, or accountant who knows how to handle crypto assets.

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