Inheritance planning for crypto

If you hold your own keys and something happens to you, your crypto can be lost for good. No bank will hand it to your family. Inheritance needs a plan, and the plan must not weaken your security today.

Why crypto is different

With a bank account, your executor shows legal documents and the bank releases the money. Self-custody has no such door to knock on.

Fidelity's estate planners put it this way: "Without the private key, however, even a fiduciary with full legal authority could likely not access the crypto wallet."

So your heirs need two things: the legal right to the assets and the practical means to reach them.

What not to do

• Do not write your seed phrase in your will. In many places a will becomes a public record after death, and several people handle it before then.
• Do not hand your seed phrase to a relative today. That gives them full control now, and adds their mistakes to your risks.
• Do not rely on memory or hints. Instructions that only you can decode will fail when they are needed.

A basic plan

1. Make an inventory. List what you hold and where: which exchanges, which wallets, which devices. No secrets go on this list. Its job is to tell your family what exists.

2. Write a letter of instruction. Explain in plain steps how to reach each holding, where the device is and where the seed phrase backup is kept. Write it for someone who has never used crypto. Keep it sealed, in a secure place, apart from the backups themselves.

3. Choose the right person. Pick an executor or helper you trust and who can follow technical instructions, or can get help. Tell them that a plan exists and where the letter is. They do not need the secrets yet.

4. Put the legal side in place. Ask a lawyer to make sure your will or trust covers digital assets and authorises your executor to handle them. In the United States, most states have adopted a law that lets executors manage digital assets when the documents expressly allow it.

5. Keep it current. Review the plan once a year and whenever you change wallets, exchanges or backup locations.

Options for larger holdings

• Multisig. A 2-of-3 wallet, as in Lesson 38, can place one key with a family member or a lawyer. No single key holder can spend alone, and your death does not strand the funds.
• A split of knowledge. One trusted person knows where the seed phrase is kept and another holds the passphrase.
• Professional custody. For significant sums, a regulated custodian with an estate process may suit some families better than self-custody.

Each of these adds complexity. Test them while you are able to fix problems.

Exchange accounts

Coins on an exchange are handled more like a financial account. Your executor contacts the exchange with a death certificate and proof of authority. Your inventory should name every exchange, because your family cannot ask for what they do not know about.

Rehearse it

Ask your chosen person to read the letter, without the secrets, and explain it back to you. Where they get stuck, rewrite it.

Get advice

Inheritance and tax law vary by country. This lesson is general education. For the legal documents, use a qualified estate lawyer.