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 Understanding Estate Planning with Crypto Assets

Law Office of Jonathan D. Alexander, Esq.

Since Bitcoin’s inception in 2009, cryptocurrencies have garnered significant attention from investors. Despite their inherent volatility and the dramatic collapses of several platforms in 2022, such as the FTX scandal, crypto assets have established a lasting presence. As of October 2023, an estimated 100 million cryptocurrency wallets exist worldwide, collectively valued at approximately $1.27 trillion. This trend is prompting estate planning clients to explore crypto assets as a means to diversify their investment portfolios. Consequently, estate planners must stay informed about these assets and adapt their practices accordingly.

 What Are Crypto Assets?

Crypto assets represent value or claims in digital form, utilizing distributed ledger technology (DLT) like blockchain. Unlike traditional centralized ledgers managed by banks, blockchains operate without a central authority, providing a secure method for conducting and recording transactions. Each transaction on the blockchain is verified through a consensus protocol, ensuring transparency and security.

Two of the most popular crypto assets are cryptocurrencies and non-fungible tokens (NFTs). Cryptocurrencies are fungible tokens, meaning each unit is identical and interchangeable with other units. In contrast, NFTs are unique and cannot be exchanged on a one-to-one basis with other tokens.

 Benefits of Crypto Assets

Despite their volatility, crypto assets offer several benefits that may justify the investment risks. These include:

1. Ease of Access: Anyone with a smartphone, computer, and internet connection can use or invest in crypto assets.

2. Privacy: Transactions can generally be completed anonymously.

3. Transparency: The blockchain records the history of transactions, ensuring transparency while maintaining user privacy.

4. Speed: Crypto transactions are rapid and secure, without the delays associated with traditional banking transfers.

 Storing Crypto Assets

Crypto assets are stored on public blockchain networks, with access managed through digital wallets that generate and store public and private keys. These wallets can be:

– Paper Wallets: Physical documents with keys or QR codes for transactions.

– Software Wallets: Digital wallets connected to the internet, providing quick transaction capabilities but more vulnerable to hacking.

– Hardware Wallets: Physical devices like USB sticks that store keys offline, offering enhanced security.

 Estate Planning Considerations

When planning estates involving crypto assets, consider the following:

1. Legal Ambiguities: Some cryptocurrency-related laws are still untested in court.

2. Property Classification: Hardware wallets may be considered tangible property, while software wallets are likely intangible.

3. Ownership and Beneficiary Designations: Cryptocurrency cannot typically be jointly owned or have beneficiary designations. Possession of the key equals ownership of the asset.

4. Secure Access Information: Estate plans should outline where and how to access crypto assets, ensuring privacy and security.

 Client Intake and Documentation

During client intake, gather detailed information about their crypto assets, including types and storage methods. Ensure clients update this information regularly. Understand the familiarity of beneficiaries and fiduciaries with crypto assets to determine appropriate handling upon the client’s death.

 Drafting Estate Plans

Draft estate plans with specific information about the client’s crypto assets. Avoid including private keys or passwords in the documents. Instead, provide detailed instructions for fiduciaries to access and manage these assets securely. Consider including permissions for fiduciaries to engage in high-risk investments if desired.

 Ensuring Access and Administration

Clients should securely store access information and create a detailed guide for fiduciaries. After a client’s death, executors should search for crypto assets by reviewing bank accounts, digital devices, and other records. The basis of these assets for tax purposes is their fair market value at the date of death.

 Tax Planning Strategies

The IRS treats crypto assets as property, subjecting them to capital gains tax rules. This classification allows for strategic tax planning, including leveraging the step-up in basis at death and donating appreciated assets to charities for tax deductions.


Cryptocurrencies offer unique benefits and challenges for estate planning. By staying informed and adapting practices, estate planners can ensure their clients’ digital assets are managed effectively and securely.

Call Us Today

For personalized guidance on incorporating crypto assets into your estate plan, contact us at (949) 334-7823 for a confidential consultation.

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