
Cryptocurrency gives savvy investors another way to diversify their investments and increase the value of their hard-earned money. The rapid rise of these decentralized currencies also creates new challenges for estate and legacy considerations. Relying on creative, forward-thinking legal strategies allows you to ensure these investments aren’t lost to time, especially considering the unique ways these are accessed.
Unlike traditional assets, digital currency exists outside of standard financial institutions, making it easy to lose access if proper planning isn’t in place. Without clear instructions and proper documentation, heirs and fiduciaries may struggle to retrieve crypto assets or even be locked out entirely. Estate planning that accounts for cryptocurrency ensures that investments are properly secured and passed on without unnecessary risk.
Addressing Crypto Within Your Estate Plan
Addressing cryptocurrency investments in your estate planning documents prevents these assets from being lost over time. Listing crypto holdings and providing clear guidance on access ensures trustees, heirs, and beneficiaries are able to access and profit off of your valuable investment. A trust can provide additional security and control, allowing a designated trustee to manage the assets according to specific terms.
Given the potential for market volatility, estate plans can also include language allowing fiduciaries to either retain or liquidate crypto holdings based on the intended strategy (especially when you plan to hand these assets over to an heir who may not yet have the knowledge or skills necessary to do so themselves).
Privately Storing the Necessary Access Instructions
Even with a well-drafted estate plan, cryptocurrency is useless without the necessary access credentials. Crypto wallets require private keys, PINs, and/or passcodes, which should never be included directly in a trust or will due to security risks. Instead, a separate memorandum can detail step-by-step instructions for accessing and managing these assets. This document should outline wallet types, storage locations, and necessary passwords, ensuring fiduciaries have the specific information required to retrieve the holdings.
The security of this information is just as important as the instructions themselves. A trusted individual or professional service can hold the private key separately, reducing the risk of unauthorized access. Some crypto investors use a “deadman’s switch,” which releases private keys to designated heirs if no activity is detected over a set period. Other options include multi-signature, or “multisig,” wallets, which require multiple approvals to access the funds, reducing the likelihood of loss or theft.
Passing Cold Wallets Outside of Probate
Cold wallets present unique challenges when passing assets to heirs. Since these wallets exist outside of typical online exchanges, they may be considered tangible personal property under estate laws. If a will or trust states that all tangible property passes outright to heirs, this could unintentionally separate crypto holdings from the rest of the estate. Proper classification and clear instructions prevent disputes and ensure the intended beneficiary receives the assets.
Some crypto investors store cold wallets in safe deposit boxes owned by an LLC, keeping them outside of California probate. If this is the case, then the LLC itself should be transferred to your trust. However, LLCs have limited efficacy with estate planning for cryptocurrencies, as the ultimate control resides with whomever has access to the accounts and wallets. In other words, there is rarely a succession of interest benefit for an LLC or corporation to hold cryptocurrency. Others create legal agreements that require multiple parties to authorize access, ensuring the wallets are only accessible by trusted individuals under specific circumstances outlined by the investor.
For those concerned about heirs managing the assets, a trustee can be granted authority to exchange crypto for cash before distribution. These strategies prevent unnecessary complications and ensure that the value of the cryptocurrency remains protected throughout the trust administration process.
Forward-Thinking Estate Solutions for Your Legacy
A well-structured estate plan protects both the value and accessibility of crypto assets. Without clear legal direction, heirs risk losing valuable holdings due to inaccessibility or legal disputes. Strategic planning ensures your cryptocurrency investments pass according to your wishes while maintaining the security and privacy of your legacy. Dahl Law Group provides the legal solutions necessary to safeguard your digital assets and secure your legacy. Contact our offices in Sacramento or San Diego to get started on implementing the right legal strategy for your estate and your investments.

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