I once met with the adult children of a successful software engineer from Manhattan. Their father had passed away suddenly, and while they knew he was an early adopter of Bitcoin and Ethereum, they had no idea how to access his holdings. They found ledgers with cryptic notes, a hardware wallet that looked like a USB drive, and no passwords. The family was facing the real possibility that a seven-figure inheritance would be lost forever, locked away in a digital vault with no key.
This story is not uncommon in my practice. Traditional estate plans—wills, powers of attorney—were not built for assets controlled by a secret string of characters. A bank account can be accessed by an executor with a death certificate. Real estate deeds can be transferred. But a cryptocurrency wallet without a private key is just a string of inaccessible code on the blockchain.
The Fiduciary Access Problem
The core issue with passing on cryptocurrency is one of access. Your ownership is defined by your control of a private key. If that key is lost, the assets are gone. If it falls into the wrong hands, the assets can be stolen with no recourse. This presents a unique challenge for the executor of a will or the administrator of an intestate estate.
How can your chosen fiduciary take control of your crypto assets after your death? You cannot simply list your seed phrase in your will. A will becomes a public document once it is filed for probate in Surrogate’s Court, and putting your private keys in a public document is like taping your bank PIN to the front of your debit card. It invites theft.
Informal, non-legal instructions for your family are also fraught with risk. These notes can be lost, misunderstood, or challenged. Without a formal legal structure, your family is left guessing at your intentions and may be unable to legally take control of the assets, even if they can find the keys.
Using a Trust as a Framework for Digital Legacy
For my clients who hold significant digital assets, we often establish a revocable living trust. A trust is a private legal agreement that allows you to transfer ownership of your assets to a trustee, who manages them for your beneficiaries according to your instructions. It avoids probate and keeps your affairs out of the public record.
For cryptocurrency, the process is deliberate:
- Funding the Trust: You can create a new wallet or account with a qualified custodian that is formally owned by the trust. The trust becomes the legal owner of the cryptocurrency.
- Appointing a Trustee: You name a trustee—and one or more successor trustees—who will have the legal authority to manage the trust assets upon your incapacity or death. This could be a trusted family member, a professional fiduciary, or a co-trustee arrangement where one person handles traditional assets and another, more tech-savvy individual manages the digital ones.
- Providing Secure Instructions: The trust document itself contains the instructions for distribution—who gets what, and when. Separately, you provide your trustee with a secure and reliable method for accessing the private keys. This is often done through a sealed letter of instruction, kept with your attorney or in a safe deposit box, that is only to be opened upon specific trigger events.
This structure provides a clear legal chain of command. Your trustee has the fiduciary duty to follow your instructions, gather the assets, and distribute them to your beneficiaries, all without court intervention.
A Trustee’s Duty Under New York Law
In New York, a trustee’s responsibilities are governed by a strict set of fiduciary duties. The law considers digital assets to be property. EPTL § 1-2.15 broadly defines “property” as “anything that may be the subject of ownership,” which includes cryptocurrency.
This means your trustee has a legal obligation to manage these assets prudently. The Prudent Investor Act, codified in EPTL § 11-2.3, requires a trustee to exercise reasonable care, skill, and caution. For a volatile asset class like cryptocurrency, this duty is critical. Your trust document can provide specific guidance: you might direct your trustee to liquidate the assets immediately upon your death, to hold them for a certain period, or to distribute them “in-kind” to beneficiaries who have their own wallets.
Without this guidance, a trustee is left to interpret their duty of prudence, which could lead to conservative decisions you might not have wanted, such as immediate liquidation at an unfavorable price. A well-drafted trust removes that ambiguity and protects both your trustee and your legacy.
Stewardship.
Properly planning for your digital assets is an act of stewardship. It ensures that the value you created is not lost to a forgotten password or a misplaced hardware wallet. It protects your family from the immense stress of trying to recover assets that were designed to be difficult to access.
If you have built a portfolio that includes cryptocurrency, the next step is to create a clear inventory of your holdings—what you own and where it is held, without recording the private keys themselves. Once you have that inventory, we can schedule a confidential meeting to discuss how to integrate these modern assets into a durable estate plan.
