Though cryptocurrency is an asset that many are yet to adopt, new regulations are making it more accessible than ever. Learn more about cryptocurrency in regards to estate planning, and what to do if you’ve recently lost a loved one who used this digital asset.

What Is Cryptocurrency?

A cryptocurrency – or crypto, as it’s often called – is a digital or virtual currency that operates on a decentralized network. Cryptocurrency can be used to pay for goods and services, and can be traded for profit. The first cryptocurrency, and perhaps the most well-known crypto, is Bitcoin. Today, there are thousands of cryptocurrencies in the marketplace.

Though cryptocurrency has been around for years, it’s still viewed by many as a pretty new asset. A 2023 study found that only 17% of US adults had ever used, traded, or invested in cryptocurrency. There are different reasons why individuals are still wary of crypto, including confusion about the industry and a number of legal cases involving crypto CEOs and fraud.

However, due to recent developments, the number of cryptocurrency users is expected to grow. Last month, the Securities and Exchange Commission (SEC) approved spot bitcoin exchange-traded funds, or ETFs. Though this doesn’t apply to all crypto assets, the accessibility and regulatory protections provided by this approval may serve to strengthen consumer confidence.

How To Uncover Your Loved One’s Cryptocurrency

Essentially, cryptocurrency is a part of a decedent’s estate, just like a bank account. And it’s allocated to heirs in the same way, according to directives in a will or trust or via intestate succession. With crypto however, the tricky part is finding it. Crypto organizations highlight the anonymity of crypto as a benefit, but this can make for a very challenging process after an individual’s death.

Recent studies show that only about half of Americans have an estate plan. And research also shows that the vast majority of crypto users are under the age of 60 – which means it’s very likely they don’t have an estate plan in place. This means there may not be a record of what form of crypto they used, where it’s stored, or what the password is.

If you’re the personal representative of your loved one’s estate, you may be able to find signs pointing to crypto, even if the decedent didn’t have a will. For example, they may have mentioned it in conversation, or posted about it on social media. Not only are crypto assets part of the estate that will be distributed to heirs, but they’ll need to be indicated on your loved one’s final tax return. An experienced estate attorney can help guide you through this discovery process.

Cryptocurrency: Proactive Planning Is Key

With all this in mind, the best way to ensure your cryptocurrency is allocated efficiently after your death is to have proactive conversations while alive. Talk to your heirs about your cryptocurrency and gauge their understanding of this emerging asset. Will they want to continue trading? How should it be distributed?

The next step is to meet with an estate attorney. You’ll need to outline your wishes in a will or trust and provide information on your cryptocurrency, including your password. If your crypto is stored on what’s known as a cold wallet – a hardware device that keeps your data offline – you’ll need to indicate where it’s stored and how to access it. All of this information should be stored securely, to ensure it’s only accessed by your attorney and personal representative.

There are many confusions surrounding cryptocurrency, and crypto legislation is ever-developing. Connect with our team for a free consultation.