Estate Planning for Cryptocurrency and Digital Assets: Who Gets the Bitcoin—and Can They Access It?

Suppose someone dies owning $500,000 of Bitcoin.

His will is perfectly clear: everything goes equally to his three children. There is no family dispute. Nobody questions the will. The children plainly inherit the estate.

There is only one problem.

Nobody knows how to access the Bitcoin.

That scenario illustrates what makes cryptocurrency different from many other estate-planning assets. With Bitcoin, two questions that usually travel together can come apart: Who is legally entitled to the property?

And: Can that person actually control it?

A good cryptocurrency estate plan has to answer both.

Inheriting Bitcoin and Accessing Bitcoin Are Different Problems

Bitcoin does not stop being property because its owner dies. The IRS treats cryptocurrency as property for federal tax purposes, and ordinary estate-planning principles still matter. A will, trust, intestacy law, or other ownership arrangement can determine who is legally entitled to the asset.

But cryptocurrency introduces a separate access problem.

Bitcoin transactions depend on cryptographic credentials. In a typical self-custody arrangement, the ability to spend Bitcoin ultimately depends on control of the necessary private keys. Modern wallets often allow those keys to be restored from a recovery phrase.

If the necessary credentials are permanently lost, there generally is no bank, court clerk, or customer-service department capable of recreating them.

That means an heir can have a valid legal claim to Bitcoin that remains visible on the blockchain but practically unreachable.

Before drafting around cryptocurrency, therefore, the first question is not simply “Who should inherit it?”

It is “How is it held?”

Cryptocurrency Held by a Custodian Is One Problem

Suppose the Bitcoin is held through an exchange or another third-party custodian.

In that situation, an institution exists that can respond to legal authority. The process may still require death certificates, court appointments, account information, affidavits, or other documentation, and procedures vary among custodians. But the problem resembles traditional estate administration in one important respect: there is somebody on the other side of the transaction.

Wyoming and New Mexico both have statutes specifically addressing fiduciary access to digital assets.

Under Wyoming's Uniform Fiduciary Access to Digital Assets Act, a custodian generally must disclose qualifying digital assets of a deceased user to the personal representative when the statutory requirements are satisfied, subject to the user's directions and other limitations. The custodian may provide full account access, partial access, or a copy of the relevant digital asset.

New Mexico's Revised Uniform Fiduciary Access to Digital Assets Act takes a similar approach. Its statute establishes procedures under which a personal representative can request disclosure of digital assets and permits a custodian to provide full access, partial access, or a copy of the asset.

There is an important qualification. These statutes govern access and disclosure. They do not replace the rest of the estate plan or necessarily determine who beneficially owns the property.

That distinction matters.

Self-Custody Is a Different Problem

Now change the facts.

Instead of holding Bitcoin through an exchange, the owner used a hardware wallet and controlled the keys personally.

There may no longer be a custodian to whom the executor can send a death certificate.

Both Wyoming and New Mexico give appropriately authorized fiduciaries access rights with respect to certain digital assets that are not held by a custodian or subject to a terms-of-service agreement. Whether those provisions map neatly onto every form of blockchain-native, self-custodied cryptocurrency is a more complicated question.

Either way, the statute cannot solve the cryptography problem.

A probate judge can determine who is entitled to property and who has authority to administer an estate. A trust can determine who holds property for beneficiaries. But no legal instrument, standing alone, generates a missing private key.

This is where ordinary estate planning and cryptocurrency custody have to meet.

Your Will Still Matters. So Does Your Trust.

The fact that access requires separate planning does not make traditional estate-planning documents irrelevant.

Quite the opposite.

Someone who leaves perfectly usable wallet credentials but no clear disposition of the Bitcoin may solve the technical problem while creating an ownership problem. Possessing the means to transfer cryptocurrency is not necessarily the same thing as being legally entitled to take it.

A will or revocable trust can establish who ultimately receives the asset and who has authority to administer it. A trust may also offer continuity through incapacity and death, rather than waiting for the appointment of a personal representative.

(But, remember, simply typing “all cryptocurrency” onto a trust schedule or leaving your "entire estate" to your heirs in a will does not answer every custody, access, or evidentiary question that can arise later.)

One Small Digital-Asset Provision Can Override Another

There is another reason cryptocurrency owners should review more than their wills.

Both Wyoming and New Mexico permit a user to give disclosure instructions through an online tool offered by a custodian. Where the statutory requirements are met and the tool allows the user to modify or delete the direction, that direction can override a contrary disclosure instruction in a will, trust, power of attorney, or similar document.

That does not mean an online legacy setting necessarily changes ownership of the cryptocurrency. The statutes are addressing disclosure and fiduciary access.

But it does mean an estate planner should ask whether the client has made account-level choices that conflict with the documents sitting in the estate-planning binder.

A digital estate plan should be coordinated, not layered together by accident.

Do Not Put the Seed Phrase in the Will

The obvious response to the access problem is also potentially a dangerous one:

“Fine. I will put the recovery phrase in my will.”

That may solve one problem by creating another.

A recovery phrase can provide the information necessary to restore control over a wallet. Anyone obtaining that information prematurely may therefore gain practical control of the cryptocurrency. Standard Bitcoin security guidance emphasizes both maintaining recoverable backups and protecting those backups from unauthorized access.

A will, meanwhile, is a legal instrument intended to be handled by other people and potentially filed in a probate proceeding after death. It is generally a poor location for secrets whose disclosure can permit irreversible transfers of valuable assets.

The better conceptual approach is to separate two functions.

The estate-planning documents and ownership arrangements establish who is entitled to the asset and who has authority and responsibility to administer it.

A separate secure recovery arrangement tells the properly authorized person how to locate or obtain whatever is necessary to administer the cryptocurrency.

The right arrangement will depend on the size of the holding, the custody method, the sophistication of the fiduciary, and the owner's security concerns. For significant holdings, there may be good reasons to consider multisignature arrangements, institutional custody, or other structures that reduce dependence on a single secret or device.

The estate plan does not need to become an instruction manual for stealing the estate.

Create an Inventory Without Creating a Treasure Map

There is a simpler problem that comes before key recovery:

Does anybody know the cryptocurrency exists?

An executor cannot administer an asset that nobody can identify.

A useful digital-asset inventory might identify:

• the type of asset;

• whether it is custodial or self-custodied;

• the exchange or type of wallet involved;

• which entity or trust owns it;

• where the fiduciary should look for the separate access procedure; and

• whom the fiduciary should contact for appropriate technical assistance.

What it ordinarily should not become is a single document containing every password, private key, recovery phrase, and location necessary to move the assets.

The objective is discoverability without unnecessary exposure.

Do Not Wait Until Death to Solve the Problem

The same issue can arise while the owner is alive.

Suppose someone holds substantial cryptocurrency in self-custody and suffers a serious stroke. The Bitcoin still exists. The owner still owns it. But someone may need to manage the property for medical expenses, taxes, investments, or ordinary financial administration.

Wyoming and New Mexico both provide statutory mechanisms for agents acting under powers of attorney to obtain access to certain digital assets held by custodians, subject to the terms of the statutes and the scope of the agent's authority. Both states also address trustees and court-appointed fiduciaries.

Again, however, legal authority is only half of the equation for self-custodied assets.

A carefully drafted power of attorney is not much comfort if the agent has no way to locate the wallet or obtain the credentials needed to act.

Cryptocurrency planning is therefore as much an incapacity-planning issue as an inheritance issue.

There Is Also a Tax Recordkeeping Problem

Successful access does not end the administration.

The IRS treats cryptocurrency as property. Inherited property generally receives a basis tied to fair market value at the decedent's death, subject to important exceptions and special rules. A later sale or exchange can then create capital gain or loss measured from the applicable inherited basis.

That makes records important.

The fiduciary may need to determine how much cryptocurrency existed at death, its fair market value, which wallets or accounts belonged to the decedent or a trust, and what happened to the assets during administration.

For an estate containing substantial cryptocurrency, preserving ownership and transaction records can be almost as important as preserving technical access.

The broader estate-planning question is familiar: estate tax, income tax, basis, ownership, and control do not always produce the same answer. That is especially worth remembering when cryptocurrency is held in an irrevocable trust or transferred during life.

Solve Both Halves of the Problem

Cryptocurrency does not make wills, trusts, powers of attorney, or fiduciary law obsolete.

It makes coordination more important.

A sound plan should answer at least four different questions:

Who legally owns the cryptocurrency now?

Who should own it after death?

Who has legal authority to administer it after death or incapacity?

And will that person actually have a secure way to obtain practical control?

Traditional estate planning is very good at answering the first three.

With cryptocurrency, the fourth can no longer be assumed.

The objective is not to leave your family a seed phrase. It is to create an arrangement in which the person legally entitled to act can identify the asset, establish authority over it, and securely obtain the access needed to administer it—without making that access unnecessarily available while you are still alive.

For Bitcoin, “who gets it?” and “can they get it?” are two different estate-planning questions.

A complete plan answers both.

References

Wyoming Statutes, Title 2, Chapter 3, Article 10, Uniform Fiduciary Access to Digital Assets Act, W.S. §§ 2-3-1001 through 2-3-1017. Wyoming Legislature — Title 2

New Mexico Revised Uniform Fiduciary Access to Digital Assets Act, NMSA 1978, §§ 46-13-1 through 46-13-18 (Laws 2017, ch. 72). New Mexico Statutes, Chapter 46, Article 13

Uniform Law Commission, Revised Uniform Fiduciary Access to Digital Assets Act. Uniform Law Commission

Internal Revenue Service, Notice 2014-21, Virtual Currency Guidance, as modified by Notice 2023-34. Notice 2014-21; Notice 2023-34

Internal Revenue Service, Publication 551, Basis of Assets. IRS

Internal Revenue Service, Digital Assets. IRS

Bitcoin Developer Guide, Transactions and Wallets. Transactions; Wallets

Bitcoin.org, Securing Your Wallet. bitcoin.org