Crypto at death’s door: Some tips and considerations for bequeathing digital assets to your survivors
- February 1, 2022: Vol. 9, Number 2

Crypto at death’s door: Some tips and considerations for bequeathing digital assets to your survivors

by Mark Bell, Josh Friedland and David Portnoy

Cryptocurrencies remain an exciting emerging asset class. Given the high volatility and indefinite expected return, our firm does not recommend cryptocurrencies as part of an asset allocation at present. However, increasing numbers of investors hold such assets on a speculative basis — it’s certainly more exciting than the traditional lottery ticket. Even though few, if any, investors hold more than 5 percent of their wealth in cryptocurrency, the rise of how and where such assets are held has prompted the question: What happens to crypto after death?


While physical assets can be passed on through a will, the decentralization of digital assets makes this task much more difficult. Typically, digital assets, like cryptocurrencies or nonfungible tokens (NFTs), such as digital art, are accessed via a private key (64-digit code) known only by the owner of the crypto account. If that knowledge dies with the owner of the account or falls into the wrong hands, it may be lost forever. There are many high-profile stories of people losing crypto fortunes by misplacing these codes. To prevent either of these issues from materializing and disrupting your inheritance planning, it’s important to consider how to store digital assets properly and prepare cryptocurrencies for transfer in the event that you pass away unexpectedly.


Cryptocurrencies are traded and stored in one of two ways. “Hot wallets” are platforms used to trade cryptocurrencies, acting as costless, easy-access vehicles for holding these digital assets. However, to access your tokens, an internet connection is required, meaning you are dependent on the platform’s functionality. Should that platform be the victim of a cybersecurity attack, or cease to exist, your funds are out of your control. This potential problem lends itself to the second most common form of digital asset storage, “cold wallets.” Cold wallets exist offline, usually as USB drives, and should be kept in a secure location. Regardless of where you store your crypto, you must know your private key to access funds and, in the case of cold storage, a PIN code and recovery phrase are also required. As such, cold backup of your hot wallet and specific instructions for any heirs are vital. Additional tips and best practices include:

  • Spread your bets. Most hot wallet companies are new, so consider utilizing a well-known and common wallet like PayPal, or one that’s very large in size, such as Coinbase.
  • Use the right wallet. Different hot wallets have varying utilities. MetaMask is intended for holding, sending, and receiving Ethereum; Coinbase Wallet is designed to hold cryptocurrencies purchased through the Coinbase exchange, etc.
  • Set a recovery phrase for your cold wallet.
  • Don’t overcomplicate the system (i.e., storing the key, the PIN and the recovery phrase in different places).
  • Use hot and cold wallets. Keep the majority of your cryptocurrency in a cold wallet and utilize your hot wallet for crypto you plan to use in the near term. For example, keep your Ethereum in a cold wallet and transfer it to your hot wallet when you’re ready to pull the trigger on the NFT that you’ve had your eye on.


When someone dies, they either have a will that dictates how their assets will be distributed or, if they die without a will, a government formula outlines how their assets will be divided. While a will outlines who should receive what, it typically doesn’t have an up-to-date asset list, nor does it contain passwords or access keys.

With the rapid growth of the cryptocurrency ecosystem in recent years, new companies, such as, have emerged to address the issue of transitioning cryptocurrency when you die. Sarcophagus is working to create a “decentralized dead man’s switch” that will carry out the holder’s wishes, via smart contract, in the event that they die or are incapacitated. Sarcophagus, and projects like it, will utilize blockchain technologies to automate and enhance the transfer process for crypto assets when the original user passes away.


The large growth in value of cryptocurrencies has made them a more commonplace aspect of people’s net worth and something that they should be thoughtful about protecting and potentially passing on in the event of their untimely demise.


Mark Bell, Josh Friedland and David Portnoy are part of the family office and private capital team at Balentine. This and other insights are available at:

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