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Estate Planning

How To Handle Crypto And NFTs For Estate Planning

By Eric Rosenberg • February 3, 2022

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estate planning for crypto and NFTs

Hopefully, we all live to a ripe old age. But there’s always a possibility that an accident or illness could cut our time in this world short. That's why it’s critical to have a plan in place earlier rather than later to hand off your crypto accounts to your chosen heirs.

If you're a cryptocurrency expert, you know about public wallet addresses, private keys, seed phrases, cryptocurrency exchanges, and turning digital money into fiat. But do your spouse, parents, or kids have any of that knowledge too? 

If not, you need to create a detailed cryptocurrency estate plan. What are the best ways for managing your digital portfolio’s future after you've passed? Here’s a closer look at estate planning for crypto and NFTs.


Table of Contents
Estate Planning For Crypto And NFTs: What To Include
Asset Access And Transfer Instructions
Tax Planning
Tools To Help You Safely Pass On Your Digital Assets
Password Manager
Physical Backups
Hardware Wallet
Account Information
The Bottom Line

Estate Planning For Crypto And NFTs: What To Include

Your cryptocurrency estate plan should be made up of at least two parts:

  • Asset access and transfer instructions: It’s best to create detailed, step-by-step instructions on what should happen, including how to sell if necessary.
  • Tax planning: If you’re lucky enough to be a crypto millionaire (or U.S. dollar millionaire), you may owe estate taxes.

Below, we break down both of these critical components of estate planning for crypto and NFTs.

  • Warning: Anyone with your cryptocurrency secret key or seed phrase can access and withdraw your digital assets. Keep this information secure and only share it with trusted individuals.

Asset Access And Transfer Instructions

If you pass away and have money in a bank, your family can go through a process called probate to gain access to your funds. That’s not going to work if your crypto is locked away and you were the only one with the password.

There are many stories about people losing access to precious crypto wallets due to lost hard drives and misplaced seed phrases. It would be a shame to deprive your loved ones of any money because they don’t know how to access it.

That's why you'll want to create a list of your keys or seed phrases. This document should be kept somewhere safe in a place that your heirs can access and included with will or trust documents if you have them.

Tax Planning

Estate taxes only apply to those giving more than $11 million in assets to an individual or $23 million to a couple. That means the odds are low that it will apply to you. But if it does, it’s a good idea to consult with an estate planning expert.

If your heir owes estate taxes, it could help them to have a plan for what they can sell from your crypto portfolio to cover that liability. Many people don’t have the cash on hand to cover estate taxes from savings.

Note that the cryptocurrency world is ripe for scams. So only work with trusted exchanges and providers when managing any cryptocurrency.

Tools To Help You Safely Pass On Your Digital Assets

Consider using any of these tools to ensure your family or another designee can access your digital assets.

Password Manager

Any regular web user should consider using a password manager to keep all of your usernames and passwords safely encrypted behind one master password.

Ensure your heirs know about your password manager account, have the password, and know how to use your two-factor setup. If you’re into open-source software, Bitwarden is a good choice.

Physical Backups

Having a piece of paper that contains wallet addresses, keys, and seed phrases ensures nothing is lost or forgotten. Some companies sell fireproof metal devices to hold your seed phrase.

One we recommend is the Billfodl. You can save your seed phrase in a stainless steel case, which you can then secure in a safe. By having it etched in stainless steel, you don't have to worry as much about fire.

Hardware Wallet

You can restore your seed phrase to a second hardware wallet, which you can hand off to an heir or keep with your estate planning documents. Ledger and Trezor are among the most popular hardware wallets.

Account Information

In addition to giving access to any exchange accounts and wallets, it’s not a bad idea to make a complete list of every account and what’s in those accounts. This will help your heirs while managing your estate. You may already have a list like this from preparing your annual cryptocurrency taxes.

The Bottom Line

While it's not something that any of us enjoy thinking about, the reality is that we will all die someday. When that day comes, an estate plan is vital to ensure your family gets all of your money, investments, and other assets. 

And if your "other assets" include digital assets, don't forget to include estate planning for your crypto and NFTs as well. By following the steps outlined above, you can ensure that your crypto stays in your family for generations to come.

Eric Rosenberg
Eric Rosenberg

Eric Rosenberg is a financial writer, speaker, and consultant based in Ventura, California. He holds an undergraduate finance degree from the University of Colorado and an MBA in finance from the University of Denver. After working as a bank manager and then nearly a decade in corporate finance and accounting, Eric left the corporate world for full-time online self-employment. His work has been featured in online publications including Business Insider, Nerdwallet, Investopedia, The Balance, HuffPo, Investor Junkie, and other fine financial blogs and publications. When away from the computer, he enjoys spending time with his wife and three children, traveling the world, and tinkering with technology. Connect with him and learn more at EricRosenberg.com.

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