According to the National Association of Unclaimed Property Administrators, about one in seven people leave unclaimed property on the table. While the recent sharp sell-off in Bitcoin And ether While the issue of estate planning rightly gets all of the short-term attention, it is a longer-term issue that is likely to get worse as cryptocurrency adoption and ownership increases.
Many people fail to consider cryptocurrencies in their estate plans or fail to tell their heirs how to access their crypto holdings. With Gallup and Pew Research polls in recent years showing that 14% to 17% of U.S. adults own cryptocurrencies, loss of access to these funds is a growing concern.
“Leaving property or investment funds in a will is fairly straightforward, but as more and more assets are invested in cryptocurrency, there is a risk that a large portion of the inherited assets will be forfeited,” said Azriel Baer, partner in the estate planning and administration group at law firm Farrell Fritz.
This problem could be partially alleviated by crypto ETFs, which have become increasingly popular among investors since the first batch of spot Bitcoin ETFs were approved by the SEC in 2024, such as the iShares Bitcoin Trust (IBIT), followed by Ethereum spot price ETFs, such as the Fidelity Ethereum Fund ETF (FETH), a few months later. These ETFs allow investors to access the crypto asset class without actually owning crypto, helping to reduce the likelihood of losing actual crypto.
Still, estate planning mistakes are common among crypto owners and can be avoided. Here are some of the biggest issues that cryptocurrency owners will have to deal with sooner rather than later.
Wills, if they exist, often do not contain any language regarding digital assets
According to a Caring.com survey, only 24% of Americans have a will that describes how they want to manage their money and estate after they die. Even those who have a will have not updated it for many years. According to the survey, nearly one in four Americans said they have not touched their will since the original was written.
This can be problematic for many reasons. An old will may no longer reflect people’s current wishes. In a crypto-specific context, anyone who has not updated their estate plan in recent years may not have the necessary language to give the trustee or executor the legal authority to gain access to digital assets.
“It’s very common for people to not update their estate planning documents for 10, 20 years, or sometimes longer. If that’s the case, you’re behind,” said Patrick D. Owens, a shareholder at Buchalter and a member of the law firm’s Tax, Benefits and Estate Planning practice group.
If digital asset information is missing, your heirs may need to go to court to obtain power of attorney for the executor or estate administrator to access the crypto assets. Most likely they’ll get access, “but it’s a hassle,” Owens said. “Of course it takes time and money to go to court.”
Even with a will, crypto assets can get stuck in court
For many people, a standard will is appropriate, but many attorneys also recommend that their clients use a revocable living trust as part of their estate planning. Creating a will is less expensive, but a revocable living trust provides more privacy and can help limit the time and expense of the probate process after death.
Baer recommends his clients transfer their cryptocurrencies to a revocable living trust so that the trustee has immediate access upon the owner’s death. It could take six to eight months or longer for a will to settle in probate, and in the meantime the heirs would not have access to the assets. For example, if the price of the cryptocurrency drops quickly, they will have to wait to sell if the estate is in probate. He said placing crypto assets in a revocable trust to avoid probate can avoid many headaches.
Generally, a revocable trust is combined with a will so that assets not in the trust at the time of a person’s death are transferred to the trust and distributed accordingly.
Failure to share basic crypto information can cost millions
You don’t have to tell your heirs that you are worth a fortune in Bitcoin before you die, but you should make sure they know how to access your cryptocurrencies after your death.
Baer worked on an estate where heirs lost tens of millions of dollars in cryptocurrency because they did not know the deceased’s private keys, which act as digital passwords to grant access to cryptocurrency funds and prove ownership of blockchain assets.
Someone should know how to access the assets, whether through written instructions in a safe, a home safe, or through instructions kept with a lawyer or with one of the various crypto inheritance services that help ensure crypto assets are passed down to your family members, Baer said. Do not include these private keys or other sensitive information in a will because wills become public through the probate process, he added.
Many designated trustees cannot handle crypto
The person you chose to manage your other assets may not be the right person to manage the crypto portion of your estate.
Not everyone understands crypto, the volatility involved, or how to handle digital currencies, which means a lot of money can be lost unintentionally. The recent volatility in Bitcoin’s price is a reminder that the financial losses could be significant for someone who takes weeks to become familiar with Bitcoin transactions, Baer said. “Uncle Bob may be a great person, but he may have greater challenges transacting in an asset class with which he is completely unfamiliar,” he added.
Sometimes even institutional trustees are unable to take responsibility for crypto. An Owens customer died with half a million dollars in Bitcoin and Ether. The institutional trustee overseeing the client’s account declined to take responsibility for the cryptocurrency and a special trustee was appointed. Fortunately, the client had a nephew who took over the role, but finding a suitable replacement can often be costly from a time and financial standpoint, Owens said.
No planning for crypto inheritance taxes
Given the massive explosion in value surrounding cryptocurrencies, many people have large crypto holdings that could be subject to significant taxes, be it income or inheritance taxes, and a lack of planning could be detrimental to their families, said Jonathan Forster, shareholder at law firm Weinstock Manion.
Depending on the size of the estate, inheritance taxes may apply. The federal estate tax exemption for 2025 is $13.99 million per individual. Some states also have an inheritance tax at the state level.
While you’re still alive, it’s important to know what impact owning cryptocurrencies could have on your estate. Forster has clients whose crypto holdings are worth more than $50 million. They were looking for an efficient way to make gifts for their children in order to get some money out of their estate. They formed a limited liability company, transferred the crypto into the LLC and gifted an interest in the LLC to an irrevocable trust for the benefit of minor children with an independent trustee, Forster said.
Many crypto investors don’t keep cost basis in mind, which can be problematic for many reasons, including if you’re considering gifting digital assets during your lifetime. If you plan to gift the assets during your lifetime, you must have a basis so that the recipient can properly account for the cryptocurrency if it is ultimately sold, Baer said. “It can be tedious to keep track of the base, but it is important,” he said.
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