As more people begin to hold cryptocurrencies such as Bitcoin for investment or as a store of wealth, it raises an important question for estate planning purposes. The unique way that cryptocurrencies are held in the digital ‘blockchain’ or ledger presents issues of access and transfer after death. Unlike bank accounts or real property, digital assets rely exclusively on direct, secured codes that are the sole means of access.

There are two ways that a cryptocurrency can be held: in a third-party exchange or in a private wallet. The first is simple from an estate planning perspective, since it more like a bank account, and the private code or ‘key’ is held by the exchange. But when Bitcoin is held in a private wallet (either virtual or on a phone or laptop), access may be difficult without knowing the private key set up by the owner.


Options for Including Your Private Wallet in Your Estate Plan

The bottom line is that without the private key to a Bitcoin wallet, those assets can never be accessed by anyone. So, it is essential to set up a way for your heirs to obtain the key, without compromising the security of your wallet while you are still alive.

The first step is to put the public key (wallet ID number) in your will or trust. That informs your executor or administrator and heirs that there are digital assets in the estate. Next, you have to decide where to put the private key, so those assets can be accessed and distributed.

Here are your basic choices:

  • Put the private key directly in the will or trust, along with the public key. This may be the simplest, but least secure method depending on where you keep the documents.
  • Put the private key in some form of separate ‘cold storage’ such as a flash drive or a piece of paper, and let a trusted party know the location.
  • With the cold storage method, you can couple this with a third-party digital storage service, or even a safe deposit box with limited access.

With any of these methods, security of the private key has to be balanced against the ability for access after death. The important point to remember is that anyone with both the public and private key can access your Bitcoin, so some measure of separation is advisable.

Your estate planning attorney can be helpful with storing and transferring cryptocurrency and can help secure the private key, as well as divide digital assets among heirs just like other property.