How Do I Leave my Bitcoin or Other Cryptocurrencies to my Heirs?

In 2024, the price of Bitcoin rose over 100% and coins currently trade for nearly $100,000. Since its introduction in 2009, Bitcoin has grown to a market capitalization of approximately $2 trillion while the global cryptocurrency market has a market capitalization of around $3.68 trillion. Its ownership has become widespread, with an estimated that 17% of American adults have owning cryptocurrency as of 2023.

The growing proliferation of digital assets and their swelling value has given rise to a new problem – how does one ensure that heirs receive these digital assets, bitcoins, or others, upon ones passing? Just as people have lost valuables such as gold, jewelry, and artwork, over the years, people are now losing cryptocurrency, in fact it is estimated that over $380 billion in Bitcoin value has been lost from owners dying and their heirs are left unable retrieve the value. This issue stems from the novel method digital assets are held.

Cryptocurrency is a digital currency that is tracked through its software code, or blockchain. Cryptocurrency is decentralized meaning that it does not require a bank or other traditional custodian be involved to exchange coins between parties as they would be in traditional securities transactions. Instead, individuals create digital wallets and exchange coins peer to peer without a centralized exchange. This decentralization makes cryptocurrency difficult to find once lost and creates the unique challenge in leaving it to heirs.

Unless specifics regarding the location and ability to access digital assets is made known to heirs in advance of an owner passing away, the risk that these assets are lost rises dramatically. This is because each digital wallet has its own private key (complex password) to access it. Without this private key no one can access the cryptocurrency in the digital wallet, including the original owner.

Given these unique circumstances, we would urge owners of digital assets to include them in an estate plan. This would be done together with your estate planning attorney to ensure that the requisite data is captured prior to an owners’ passing.

If you have a hardware wallet on a USB flash drive, ensure someone can access the flash drive. Just like other valuable assets such as gold coins or jewelry, USB drives or other physical medium for access must be safeguarded.

While cryptocurrency lacks the tangible characteristics of more traditional assets, it can still be lost. Thus, it is extremely important to understand how you hold it and ensure the value is transferred as per your wishes along with the rest of your property upon your passing.

If you have questions about estate planning in general or related to cryptocurrency, please contact your FineMark private wealth advisor.

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