What Holding Crypto Means for Your Estate Plan
Crypto assets can be lost forever without proper storage and estate planning.
By Emma Kerr | Oct. 5, 2021, at 11:54 a.m.
Crypto-assets, including cryptocurrencies and noncurrency blockchain tokens, can hold significant family wealth and also present complex challenges to securing, transferring, protecting and gifting that wealth.
Many elements of traditional estate planning are rendered obsolete in the realm of digital assets. But new strategies are evolving to meet the needs of a growing cohort of digital asset investors in a market worth more than $1 trillion.
Joel Revill, CEO of Two Ocean Trust – the first financial institution in the U.S. to offer a comprehensive digital asset wealth management platform – says estate planning may not, at first, appear compatible with the decentralized systems of cryptocurrency.
"The idea of handing over your crypto-assets or your private keys to someone else goes against that original ethos of the self-sovereign asset," Revill says. "A self-sovereign asset is a wonderful concept, but when you put it into the context of succession planning or multigenerational planning, you begin to appreciate the fragility of that custody."
Seasoned investors seeking asset diversification through the purchase of cryptocurrency may seek to formalize a plan for these assets in case of death or illness without hesitation. But for first-time investors holding a small amount of cryptocurrency or the lucky few who purchased $1,000 of Bitcoin in the early 2010s – and are now managing a portfolio worth millions – digital asset estate planning may not be top of mind. This leaves possibly millions in cryptocurrency assets vulnerable to being lost forever.
"If nobody knows you have it, it's gone," says Nathaniel W. Birdsall, senior counsel at Proskauer Rose in New York. "Somebody has to find those keys and know what they mean. It's not good if your grandma cleans out your closet and finds that string of numbers on a piece of paper and doesn't know what they are."