Can You Inherit Bitcoin?

HNWEstate Planning

bitcoin and estate planningAre you or have you already bought into the crypto craze?

If you don’t own cryptocurrency yourself, odds are you’re related to someone who does. Some 16 percent of US adults say they’ve used crypto, and it feels as though these digital assets are everywhere now.

There is a mass assortment of cryptocurrency in the marketplace.  Have you ever thought about what happens to your crypto savings/accounts if you unexpectedly (or inevitably) die?

New crypto investors aren’t necessarily thinking about what happens to their digital assets in the event of an untimely death.  But they should.

For many investors, there are no generally accepted and established ways to ensure crypto is passed on by your estate. Without a plan, crypto investors could die and leave their heirs locked out of a valuable source of financial support with no way to get it back. Even crypto professionals are running into logistical complications.  The nature of cryptocurrency makes it complicated to pass down. Cryptocurrency is usually stored on the blockchain, a digital ledger that’s formed by a network of computers throughout the world that record transactions, including the exchange of cryptocurrency. I personally do not understand it but maybe you do. People usually make transactions by using public and private keys. Public keys work like bank account numbers, and serve as an address that you can use to send other people crypto. Private keys require passwords, and are made of unique, extremely long strings of characters that unlock your crypto. Unlike other types of passwords, however, private crypto keys can’t be recovered once they’re lost or forgotten. That means that without those keys, people who are entitled to inherit their loved one’s crypto won’t be able to get it.

What happens to your crypto after you die?

Technically, nothing. Again, cryptocurrency is stored on the blockchain, so there’s a permanent record of it. That means your cryptocurrency will exist as long as the blockchain exists, and regardless of whether you’re alive or dead.

How your loved ones will be able to access and then use your cryptocurrency is a question, the answer to which largely depends on whether they know about it and if they know how to access it. Some people have written down their keys on a piece of paper where a family member can find it. Other crypto holders are relying on exchanges like Binance and Coinbase, which allow people to trade and sell crypto on the internet. These platforms will hand over control of your loved one’s crypto assets if you prove that you’re legally entitled to them — the same way a bank or brokerage firm would. But some crypto holders don’t like these exchanges, which are a consistent target of hackers. Some people also don’t like the idea of giving control of their crypto to a third party, as the concept undermines the reason why many people are drawn to crypto in the first place. Privacy!  Oh, and by the way, Binance and Coinbase don’t currently allow account holders to name beneficiaries directly on the platform, either.  (This blog was written in May of 2022 so it may be outdated at this point).

Some investors have turned to startups specifically intended to service crypto inheritance. They’re supposed to protect against the nightmare scenario of families being blocked from their loved ones’ crypto investment forever. Remember that without keys, families can find themselves searching — sometimes for years — for their loved one’s digital assets.

Across the internet, there are pleas for help from people looking for their loved one’s crypto. Some families have even hired digital forensic researchers to help them find the lost funds, hoping that they find a clue into where their loved one might have stored a record of their key before they died.

Inheritance is Challenging

Theoretically, crypto is supposed to put people’s wealth in their own hands. Because you control your private key — and your crypto is backed up on the blockchain — you don’t need to rely on any financial institution to access your money. You can control your crypto entirely on your own, which is why some crypto investors say they’re their own bank, or even “self-sovereign.”

Basically, you have to decide how much you care about your crypto’s security when you’re still alive, and how much you care about your family’s access to that crypto once you’re dead.

Striking that balance isn’t easy. Some people have shared their keys with their family members for safekeeping, only for that family member to turn around and steal their crypto.

Crypto is subject to taxes on it. The IRS considers virtual currency a form of property, so you might owe the government money if you sell crypto after inheriting it.  People are inheriting crypto is just another sign that cryptocurrencies have become a real part of everyday finances. Since crypto has become such a big part of life, it makes sense that it has become a part of death, too. But in many respects, the uncertain state of cryptocurrency estate planning is evidence that we still don’t know what role crypto will ultimately play in our lives, and that we’re still figuring out how to even use it. What we do know is that none of us live forever, even if our crypto might.

My estate planning advice:  stay away from crypto currency unless you’re so smart you actually understand this blog of mine.

To discuss your NJ estate planning matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at  Please ask us about our video conferencing or telephone consultations if you are unable to come to our office.

By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold Township, Monmouth County, NJ Estate Planning Attorney

Previous PostNext Post