Current Trends - Intersection of Cryptocurrency and Estate Planning - Episode 218
- Jenny Rozelle, Host of Legal Tea
- 12 minutes ago
- 7 min read
Hey there, Legal Tea Listeners – This is your host, Jenny Rozelle. Welcome back for another episode, which is a “current trends” topic where we talk about things going on currently that are relevant and pertinent to my estate and elder law world, and/or maybe things I’ve seen on the news or stumbled across on social media. Well today’s episode is going to be about the changing landscape of cryptocurrency and how to set things up to cleanly incorporate it as part of your estate plan, but also how to cleanly pass it on to your intended beneficiaries. I did a podcast episode on this topic a LONG time ago, but not only is this a good reminder / update from that episode, but I am almost sure things have changed since then. That episode was years ago, so yeah – today’s topic is on cryptocurrency and inheriting it, so let’s dive in…
First and foremost, let’s start with elementary simple … and make sure we are on the same page. What is cryptocurrency, what is bitcoin, etc. At its core, according to a Kiplinger article by Will Ashworth linked in the source links, it is a digital asset built on blockchain technology. Think of blockchain as a public, decentralized ledger—there are no banks nor central authorities involved. Instead, a network of users (called nodes … which is a funny term) verifies and records transactions. That is the “beauty” of crypto: peer-to-peer validation. Let’s take Bitcoin, for example—it stores every transaction ever made in a chain of “blocks,” and new blocks are added roughly every 10 minutes. The people who solve the cryptographic puzzles to add blocks are called miners—and they get rewarded with newly minted bitcoins for their efforts.
Now you might wonder, why anyone would want to own cryptocurrency? There are a few compelling reasons. First, many see cryptos like Bitcoin as a way to democratize finance—freeing it from centralized control by governments and banks. They are especially useful for moving money across borders efficiently, which is a big deal in regions with volatile currencies. There is also a popular idea that Bitcoin could act as a hedge against inflation. That belief stems from its capped supply—Bitcoin will never exceed 21 million coins, with around 19.9 million already in circulation and new ones entering the system at a steadily slowing rate. That scarcity drives interest in how its value might change as it approaches its limit.
Of course, crypto comes with real advantages—no markets ever close (so trading is 24/7), transactions can be blazing fast, and thanks to the open nature of blockchain, everything is super transparent. Anyone can view every transaction, and the code behind it is open-source, offering a level of transparency unheard of in traditional finance. But let's keep it real here—there are downsides, too. There are downsides to nearly everything, right? Crypto lives under regulatory scrutiny—think lawsuits, enforcement actions, and shifting policy landscapes. And even though a lot of these challenges eased with recent political changes, the industry is still young and volatile. That means steep gains and steep drops are part of the game. So, if you're new to investing—or just crypto-curious—this is a great moment to educate yourself before you jump in. There's serious opportunity here, but it's paired with real risk.
Now, shifting to how crypto relates to estate planning – how do you incorporate it as part of your estate plan? And what about inheriting it?
According to a Kiplinger article written by Patrick Simasko linked in the source links, cryptocurrency brings unique challenges to estate planning. The old-school approaches—like wills or trusts—don’t always work seamlessly with digital assets like Bitcoin. Since crypto is decentralized and locked behind private keys, it can easily get stuck in probate or worst case scenario, become inaccessible—and with prices swinging wildly, delays can mean real financial loss. So, what’s a smart crypto owner to do? First, check if your exchange offers a beneficiary designation—similar to naming a beneficiary on your retirement account or life insurance. If they do, fill out that Transfer-on-Death form and keep a copy. That alone can help bypass probate headaches.
If you're using private wallets like Ledger or MetaMask, though—they probably do not support beneficiary features. For those, the key is secure—but accessible—storage. That means documenting passwords, recovery phrases, and where any physical devices are stored. Hardware wallets or encrypted digital files can help—and custodial services might offer simpler beneficiary options.
Another solid move? Use a trust. By placing your crypto into a revocable living trust, you retain control while alive, but also lay out exactly how and to whom your assets should pass when you’re gone—without probate. Make sure the trust owns the wallet or funds, and appoint a trustee who understands crypto and can manage those private keys.
I mean … imagine this … imagine losing $200 million overnight (let alone having that much to lose, but I digress…) According to CRYPTOCURRENCY 101 FOR ESTATE PLANNERS by Eido M. Walny and Abigail McGowan, an article in a National Association of Estate Planners & Councils journal, on December 9, 2018, Gerry Cotton, CEO of QuadrigaCX—a major crypto exchange—tragically passed away without sharing his cryptographic keys. As a result, 100,000 accounts—worth nearly $200 million—were locked forever, inaccessible to their rightful owners or heir. His memory held the entire code; when he passed, so did access to those digital assets. That single story highlights a harsh reality: without proper estate planning, cryptocurrency can disappear forever, even if you’ve legally left it to someone in your will.
So why does this episode, this topic, Gerry’s story … all of it … why does it matter so much? For one, crypto ownership is no longer niche. According to that article in a National Association of Estate Planners & Councils journal by Walny and McGowan, about 34 million adults in the U.S. hold some form of cryptocurrency. Like I mentioned earlier, unlike bank accounts or investment portfolios, these assets do not live in institutions. They exist on decentralized ledgers, protected by private keys, and without those keys, there may be no paper trail and no backup plan. If your family or executor does ot know your crypto exists, or how to access it, it could be lost forever. Like Gerry’s story.
So, when it comes to cryptocurrency, traditional estate planning may not cover the risks. That is why crypto owners need to take some extra steps to make sure their digital assets do not vanish into thin air. The first step is being specific. Incredibly specific and details. Instead of letting crypto fall into a generic clause (usually called a residuary clause), crypto owners ideally should spell out exactly what they hold—whether it’s Bitcoin, Ethereum, or another token—and where it is stored. Estate attorneys can help draft language that calls out cryptocurrency explicitly, so there is no question it was intended to be included.
But naming the asset is typically not enough. Crypto owners may want or need a separate, secure memorandum that is not part of the Will or Trust, but that contains the super practical instructions like: account details, recovery phrases, device locations, and step-by-step directions for accessing wallets. This document should be kept private and updated regularly, since storage methods and platforms can change quickly. Attorneys can play a key role here by helping clients set up a process for keeping those instructions both safe and current.
Legal authority is another essential piece. Executors and trustees should be given explicit authorization to access cryptocurrency accounts. Without this language, an executor could hesitate—or refuse—to take the risk. And if heirs are not particularly tech-savvy, like I mentioned earlier, it may make sense to appoint an executor or trustee with enough crypto knowledge to manage the assets or even liquidate them before distribution. Another role within an estate plan is called a Power of Attorney and interestingly, sometimes Powers of Attorney have limited usefulness and that is because most cryptocurrency is not held by traditional financial institutions, so a Power of Attorney may not automatically be granted access. It only helps if the crypto is connected to something tangible, like a hardware wallet or a safety deposit box where private keys are kept.
As we start to wrap up this episode, I think it is so important to embrace that crypto is here to stay. As professionals, we need to continue to educate ourselves on this ever-changing topic; as crypto owners, you need to continue to pivot and make sure your crypto “plays nice” with your estate plan. Millions and millions of Americans now hold digital assets, so the intersection of crypto and estate planning has become critical territory that just cannot be ignored. The tragic case, where CEO Gerry Cotton's death locked away nearly $200 million in crypto assets forever, serves as a harsh reminder that traditional estate planning tools simply are not equipped to handle decentralized digital currencies protected by private keys.
Smart crypto owners MUST go beyond generic estate planning. Unique-ish assets require unique-ish estate planning. Whether through Transfer-on-Death forms, if they are available, on exchanges, revocable living trusts that bypass probate, or carefully documented recovery phrases for private wallets, the key is creating multiple layers of accessibility while maintaining security. Without this proactive approach, your digital fortune could join the growing graveyard of lost cryptocurrency, leaving your intended beneficiaries empty-handed despite your best intentions. The technology that makes crypto revolutionary—its decentralized, trustless nature—also makes it uniquely vulnerable to poor estate planning, making this conversation not just relevant, but essential for anyone holding digital assets.
Alrighty, let’s wrap this episode up, shall we? Next week, we’re back to the “celebrity estate planning” type of episode – so, for this episode, I’m thinking about doing an episode on Jim Irsay’s estate. Jim, the former owner of the Indianapolis Colts, left quite a hefty estate. So yeah, next week will probably be on him, so tune in next week to see, Legal Tea Listeners. Talk to you then!
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