Due to its increased ability to store significant amounts of wealth, cryptocurrency storage and access is fast becoming a big topic in estate planning, but thankfully not an extremely complicated one.

Cryptocurrency is generally controlled by a private key to a given wallet which permits access to any funds stored on that wallet. In addition, access to a wallet may be obtained through a 12-15 word seed phrase which can restore any lost or stolen wallet in most instances. This is in addition to any standard password used to access an exchange, a phone or a computer based wallet. If one of these is lost, any stored crypto funds may become inaccessible (though passwords can generally be recovered). Prudent estate planning requires that one or each of these be accessible by carefully designated 3rd parties in the event something happens to the owner of the crypto funds.

If funds are stored online on an exchange (generally not recommended except for a few highly secure exchanges) then the exchange password should be recorded and stored in a secure location and if 2 factor authentication is used (a message with a code sent to a phone or Google authenticator), which is standard these days, then access to the crypto owner’s phone should be facilitated posthumously or access to the exchange may not be possible. This may be done in the testamentary documents by mentioning that access to the owner’s phone is granted to the executor or trustee for the sole purpose of accessing a given account.

If access through the above means is not possible, then at this point most reputable US based exchanges will provide a method to permit access to a decedent’s account, though this type of accommodation is uncertain for foreign exchanges.

For example, Coinbase has a policy to permit access to the account of a decedent as stated here:

This process is very straightforward and should generally be the norm with other reputable exchanges. Things may get complicated with offshore based exchanges which would have their own rules or lack thereof as to how 3rd parties gains access to their accounts.  To gain access to a decent’s account, Coinbase requires the death certificate, testamentary documents such as will or trust, probate documents such as letters testamentary, photo ID of the executor or administrator, and a formal letter directing the disposition of the account. Please don’t hesitate to reach out to this Firm if you require assistance with obtaining control of any exchange stored funds. Generally an attorney is able to complete the job more efficiently when time is of the essence.

If the crypto funds are in cold storage, such as on a Treznor or Nano wallet, then the wallet should be stored in a very safe place while the password and seed phrase should each be stored in separate locations which should be recorded in testamentary documents to permit the trustee or executor to find them. Generally only the password will be necessary to access the wallet, so this is the most important item and should not be stored online. The seed phrase also should be stored offline. Of course one or both of these items may be provided to a trusted person during the owner’s lifetime but then the risk is always there that the trusted person won’t end up being so trusted or the access method will be lost or stolen from the trusted person and consequently the funds stolen. This occurs more frequently that people imagine. Even if the trusted person is a spouse, the owner may come to regret the decision to share access to their account.

Cryptocurrency is similar to gold in that whoever has access to your safe, safety deposit box, or any storage location will have access to the password or seed phrase and be able to obtain the coins, so long as they also have the cold storage wallet in their possession. Without the password a cold storage wallet is useless, and some will actually wipe clean the coin keys they hold automatically after successive failed attempts to enter the correct password. The wiped coin keys can generally be restored using the same or another cold storage wallet using the seed phrase which should be stored in another safe location. Remember its not the wallets that hold the coins, the coins are stored on the public distributed ledger; the wallets only hold the private keys which allow access to the code that is a given cryptocurrency.

The location where the password and seed are kept should be stated in any testamentary documents and access to these areas should be permitted only after the owner is deceased or the risk of total loss of the coins increases substantially. So if the passwords/keys are stored in a private safe, the code to the safe should be kept in a separate location and accessible to the trustee or executor after the owner is deceased. If the crypto passwords are kept in a safety deposit box the bank will usually require the executed trust documents, executed will, death certificate, and letter testamentary to permit access. There are no standard rules, but security is the main concern. The location of especially valuable access keys may be entrusted to a corporate third party who will safeguard them in theft proof storage locations and provide access to them according to their own rules which sufficiently demonstrate that access to a third party was previously permitted by the owner.

If you have any testamentary crypto-related questions or documents which need to be drafted or reviewed to ensure maximum protections for all involved please don’t hesitate to contact this Firm.