Biggest mistakes crypto investors make with estate planning

Roughly 1 in 7 people are leaving unclaimed property on the table, according to the National Association of Unclaimed Property Administrators. While the recent heavy selling in bitcoin and ether is rightly getting all the short-term attention, this estate planning issue is a longer-term one that’s likely to be exacerbated as crypto adoption and ownership increase.

Many people neglect to account for cryptocurrency in their estate plans, or they don’t let their heirs know how to access their crypto holdings. With surveys in recent years from Gallup and Pew Research estimating that 14% to 17% of U.S. adults have owned cryptocurrency, losing access to those funds is a growing concern.

“Leaving property or mutual funds behind in a will is pretty cut and dried, but with more and more assets placed in cryptocurrency, a large share of inherited assets are in danger of forfeiture,” said Azriel Baer, partner in the estate planning and administration group at law firm Farrell Fritz.

This issue could be mitigated, in part, by crypto ETFs, which are gaining popularity with investors since the first batch of spot bitcoin ETFs were approved by the SEC in 2024, such as the iShares Bitcoin Trust (IBIT), followed a few months later by ethereum spot price ETFs, such as the Fidelity Ethereum Fund ETF (FETH). These ETFs allow investors access to the crypto asset class without actually owning crypto outright, helping reduce the chances of actual crypto getting lost.

Nevertheless, estate planning mistakes among crypto owners are common and can be avoided. Here are some of the biggest issues cryptocurrency owners need to tackle sooner rather than later.

Wills, if they exist, often don’t include digital assets language

Only 24% of Americans have a will that describes how they want their money and estate managed after their death, according to a survey from Caring.com. Even people who have wills in place have not updated them for many years, with nearly one in four Americans saying they haven’t touched their wills since their original was drafted, according to the survey.

This can be problematic for many reasons. An old will may no longer reflect people’s current wishes. In a crypto-specific context, anyone who hasn’t updated their estate plan in the past several years may not have language to provide legal authority for the trustee or executor to gain access to digital assets.

“It’s very common for people not to update their estate planning documents for 10, 20 years or sometimes longer. If that’s the case, you’re behind,” said Patrick D. Owens, shareholder at Buchalter and a member of the law firm’s tax, benefits and estate planning practice group.

Absent language about digital assets, your heirs might have to go to court to get the authority for the executor or administrator of the estate to gain access to the crypto assets. Most likely they’ll get access, “but it’s a hassle,” Owens said. “Obviously, it means time and money going into court.”

Even with a will, crypto assets can get stuck in court

A standard will is appropriate for many people, but many attorneys recommend clients also utilize a revocable living trust as part of their estate plan. Drafting a will is less expensive, but a revocable living trust offers more privacy and can help limit the time and expense of the probate process after death.

Baer advises clients to transfer their crypto to a revocable living trust so the trustee has immediate access upon the owner’s death. It could be six to eight months, or more, before a will is settled in probate and in the meantime, heirs wouldn’t have access to the assets. If the price of the crypto was going down rapidly, for example, they would have to wait to sell it if the estate was caught up in probate. Putting crypto assets into a revocable trust to avoid probate can prevent a lot of headaches, he said. 

Generally, a revocable trust is paired with a pour-over will so that assets not included in the trust at the time of a person’s death are transferred to the trust and distributed accordingly. 

Not sharing basic crypto information can cost millions

You don’t have to tell heirs you’re worth a fortune in bitcoin before you pass away, but you should make sure they know how to access your crypto after you’re gone. 

Baer worked on an estate where tens of millions of dollars in crypto were lost to the heirs because they didn’t know the decedent’s private keys, which function as digital passwords to grant access to cryptocurrency funds and prove ownership of blockchain assets.

Someone should know how to access the assets, whether through written instructions in a safe box, a safe at home, or directions kept with a lawyer or with one of the various crypto inheritance services that help ensure crypto assets are passed on to your family members, Baer said. Don’t put these private keys or other sensitive information in a will, because wills become public through the probate process, he added.

Many designated fiduciaries can’t handle crypto 

The person you chose to handle your other assets may not be the right person to deal with the crypto portion of your estate.

Not everyone understands crypto, the associated volatility or how to transact with digital currency, meaning lots of money can inadvertently be lost. The recent volatility in the price of bitcoin is a reminder that if you name someone who needs weeks to get up to speed on how to transact with bitcoin, the financial losses could be meaningful, Baer said. “Uncle Bob may be a great person, but he may have more challenges transacting with an asset class he’s totally not familiar with,” he added.

Sometimes, even institutional trustees might not be able to take on the responsibility for crypto. Owens had a client pass away with half a million dollars in bitcoin and ether. The institutional trustee who oversaw the client’s account refused to take on the responsibility for the crypto and a special trustee was named. Luckily, the client had a nephew who took on the role, but finding a suitable replacement can often be costly from a time and money perspective, Owens said. 

Failure to plan for crypto estate taxes

With the massive explosion in the values around cryptocurrency, many people have large crypto holdings, which could be subject to significant taxes, whether that’s income taxes or estate taxes, and failure to plan could be detrimental to their families, said Jonathan Forster, shareholder at law firm Weinstock Manion.

There could, for example, be estate taxes due, depending on the size of the estate. The federal estate tax exemption for 2025 is $13.99 million per individual. Some states also have a state-level estate tax.

Knowing the impact crypto ownership might have on your estate is an important consideration while you are alive. Forster has clients whose crypto holdings are worth more than $50 million. They wanted an efficient way to make gifts for the benefit of their children to get some money out of their estate. They created a limited liability corporation, transferred the crypto into the LLC and gifted an interest in the LLC to an irrevocable trust for the benefit of minor children with an independent trustee, Forster said. 

Many crypto investors fail to keep track of cost basis, which can be problematic for many reasons, including if you’re considering gifting digital assets during your lifetime. If you want to gift the assets while you’re alive, you need to have the basis so the recipient can properly account for the crypto if it’s eventually sold, Baer said. “It can be onerous to keep track of basis, but it’s important,” he said.