Cryptocurrency and Estate Planning: Transferring Your Digital Assets After Death

How Cryptocurrency Differs From Traditional Assets

If you die as the owner of this type of asset, it is important that someone is aware that you own the crypto and knows the password to access it. Crypto isn’t held by a custodian (i.e. a banking institution) the same way traditional assets like a brokerage account are held. The only way to access it is with the proper login credentials or key (password mechanism). In some circumstances, the ability for someone other than the original owner to access the online portal holding the currency can be authorized or prohibited through specific instructions within the portal holding the currency.

Avoiding Probate is Essential for Crypto Holders

The secure and private nature of cryptocurrency is a prime reason to avoid probate in an estate. The probate of a last will and testament requires the will document to be filed with the Surrogates Court whereupon it becomes a public record. And remember, since there is no custodian as with many traditional assets, the appointment of an executor will not help to access and distribute this asset if that person does not hold the access instructions and passkey.

How Do I Transfer Cryptocurrency After Death?

You should consider transferring crypto holdings into the name of a revocable trust. Your documents should include mention of the cryptocurrency, and a separate memorandum should be available to the person handling your estate after death to alert them of its existence and how to access it. Since it is taxable as a piece of property and subject to long term capital gains, it is important that the trustee also have information relating to the cryptocurrency’s cost basis and date of transfer to the trust.

Additionally, the transfer of crypto to a trust should be documented, including a trustee’s acceptance of the asset. Attention should be paid to your cryptocurrency as you engage in the estate planning process to ensure it properly passes according to your wishes.

By Britt Burner

Britt Burner, Esq. is a Partner at Burner Prudenti Law, P.C. focusing her practice areas on Estate Planning and Elder Law. Burner Prudenti Law, P.C. serves clients from New York City to the east end of Long Island with offices located in East Setauket, Westhampton Beach, Manhattan, and East Hampton.