People who hold cryptocurrency and want it to reach their heirs face a tangle of legal and technical hurdles, because under US probate and estate law crypto is treated as a digital asset rather than as money. A beneficiary form, will, or estate plan can direct where money and physical property go, but the law does not assume a deceased person wanted private digital material handed to anyone unless they said so explicitly. That leaves crypto in an awkward position, and holders who make no arrangements risk having their funds die with them.
The path to a transfer depends first on whether the assets sit with a custodian or in a noncustodial wallet. Custodians, such as a bank or a cryptocurrency marketplace, hold and manage assets for the owner, and transfers after death are generally far easier through them. Charles Schwab and Chase are among the large financial institutions offering crypto services with experience in post-death transfers; Schwab keeps its crypto services inside brokerage accounts, so a beneficiary form signed for the brokerage account covers the crypto account too. Banks also leave records with the government and credit reporting bureaus, giving heirs a way to find the assets. Crypto accounts held at a bank are not FDIC-insured.
Other custodians include Coinbase and PayPal, neither of which had beneficiary forms as of the article's publication. Both require legal documents establishing that a person is executor of the estate or entitled to inherit, plus a death certificate and other paperwork. The process is cumbersome but straightforward, the article said. Custodial wallets also carry trade-offs: banks require identification, transactions are reported to the federal government, and custodians typically charge transaction fees.
Noncustodial wallets leave the owner in full control and require a do-it-yourself plan for passing assets on. The largest obstacle is that a lost cryptographic key is final. Benjamin Orzeske, chief counsel for the Uniform Law Commission and a staff attorney for the Revised Uniform Fiduciary Access to Digital Assets Act, said there is no company to appeal to when a key is lost. A corrupted, burned, or stolen hardware device can also cut off heirs permanently.
A second hurdle is that a fiduciary must know the crypto exists, since no government agency or credit reporting bureau records a noncustodial holding; only the people the owner tells will know. Suggestions circulating from Reddit users include email dead-man switches, printed instructions given to a trusted person, and instructions split between two people who must come together for access, all with evident flaws. Catherine Hodder, a senior attorney editor at FindLaw, told the article that a will is a public document and that usernames and passwords should never go in it. A safer location for a password is a bank safe-deposit box, with the box listed in the will, and some owners have suggested stamping a password into a metal plate.
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