Florida Elder Law & Estate Planning Blog

What You Must Know About Cryptocurrency In Your Estate Plan

An increasing number of our clients now hold cryptocurrency or are considering purchasing it. Cryptocurrency is a “digital asset” – but a digital asset like none other. It requires special consideration so that  (1) it can be passed on to the heirs of your choice and (2) it can be accessed by those who will manage your finances in the event you become incapacitated. 

The granddaddy of all cryptocurrency is Bitcoin, first introduced in 2009.  Now there are many others: Ethereum, XRP, Tether, Dogecoin. That’s just the tip of the crypto iceberg.


The Key’s The Thing


Without question the most important thing to realize is that no financial institution holds this asset. It is not government-issued currency. In fact, it’s not currency at all. When you buy cryptocurrency from a cryptocurrency exchange, you receive a private key, a string of 64 random characters. Your purchase is recorded in blockchain, an online ledger, but there is no “title” per se. This means that if you ever lose or misplace your key, the asset is likely gone, forever.

“Gone, forever” is not a rarity, either: According to the crypto data firm Chainalysis, as of January 2021 about 20% of Bitcoin, collectively worth $140 billion, had vanished due to lost keys. Although Bitcoin’s meteoric rise ($.0.09/coin in July 2010 to $49,243.00/coin in December 2021) has made millionaires of many investors, among them are a number of unlucky souls who will never see a dime of their good fortune due to lost keys. One example is James Howells, a native of Newport, Wales, U.K. An early purchaser of Bitcoin, the hard drive on which Howells stored his key was accidentally thrown into the trash. His original investment of 7,500 bitcoins is now worth hundreds of millions of dollars, but he has no way of getting at it. The hard drive is buried in a nearby landfill, with more and more trash loaded on top of it every day, and local authorities will not permit him to excavate the site. Another example: Matthew Mellon, the late banking heir. An early purchaser of $2 million worth of XRP, Mellon died in 2018, but told nobody where to find his private key. His crypto, estimated to be worth $500 million today, has vanished.

More About Cryptocurrency and Your Estate Plan


As these unfortunate examples show, you must inform your personal representative of your will, your successor trustee of your trust, and your agent under your durable power of attorney that:

(1) you own crypto, and

(2) how to access the key!

It is imperative that you have a safe storage system for  your key, and backup systems so that your key will not vanish due to hacking, computer failure, or someone tossing a piece of paper or a hard drive into the trash.

Additional points to keep in mind:

  • You cannot name death beneficiaries of your crypto. Only your estate plan can ensure that the asset passes to your heirs.


  • As with any asset, titling your crypto in the name of your trust will keep it out of probate and keep it away from public scrutiny, better protecting it from hacking and better protecting your beneficiaries from scammers.


  • Cryptocurrency is wildly volatile, and this can impact on your intended distributions. If, for example, you want to give both of your children equal inheritances, it’s wise to make both equal beneficiaries of your crypto. Monitor its value often. Depending on the terms of your estate plan, you may need to rebalance your distributions.


  • If you are planning to gift highly appreciated crypto to reduce the value of your estate for estate tax purposes, this may be a good time to do it. In 2022 the unified lifetime gift and estate tax exemption is $12,060,000. In 2026 the estate tax exemption will revert to $5.49 million, adjusted for inflation.


  • Make sure you keep track of the original purchase price. If you gift crypto and the recipient sells it, he/she will need to know the cost basis. The Internal Revenue Service considers cryptocurrency to be property and therefore, subject to capital gains tax. Of course, if you wait to transfer your crypto through your estate when you pass away, your heirs will get a step-up in basis and a reduction in capital gains taxes. Note, however, there is talk in Congress about eliminating the step-up for higher-value estates. IRS memo 2014-21 sets forth federal tax treatment of virtual currency.


  • Some professional fiduciaries – for example, bank trust departments – may not be willing to take on management of cryptocurrency.


  • Given the volatility of crypto, there is some question as to whether it falls outside of the “prudent investor” rule for your trustee. You may want to consider including language in your trust that gives your trustee the right to hold and manage crypto.


  • If you intend to leave cryptocurrency to a charity through a charitable remainder trust, you may find that some charities will not accept it.


If you own cryptocurrency, be sure to let your estate planning attorney know so that appropriate plans can be made. It is a unique asset, and all too easy to lose!