What happens to cryptocurrency when we die?

Lisa Bitter, Esq.


Ubiquitous access to, and use of, the world wide web poses challenges to lawyers, and their clients. In our last newsletter the Asset Protection group at BYH briefly addressed issues related to the passing of digital assets associated with social media software tools like Facebook, Twitter and Instagram. This month we explore issues related to passing cryptocurrency to one's heirs. Before delving more deeply into the question posed we must first define cryptocurrency, explain the nature of the blockchain upon which cryptocurrencies are built and define private keys.

A Few Definitions

A cryptocurrency is a medium of exchange that utilizes cryptography to secure the transactions and to create new units of the currency in a controlled environment. Cryptocurrencies are digital versions of alternative currencies. In 2009 Bitcoin was launched as the first decentralized cryptocurrency and many so-called altcoins, a blend of bitcoin alternatives, followed. Cryptocurrencies decentralized control - usually over the internet - rather than centralizing control in a banking system. Cryptocurrencies are reflected on a distributed ledger secured by a blockchain.

A blockchain is a distributed database - usually distributed around the world via the internet - that maintains a continuously-growing list of data records secured from tampering and revision. The blockchain consists of blocks of data containing timestamps and links to previous blocks. Users around the globe connect to the network, send new transactions to it, verify transactions, and create new blocks. Self-executing transactions on the blockchain, verified independently by random participants around the globe, eliminate the need for trust between parties and enable swift value based exchanges on a global scale.

A private key in the context of cryptocurrency is a secret number that allows a cryptocurrency to be spent. Every virtual wallet contains one or more private keys, which are saved in the wallet file. The private keys should be randomly generated and are mathematically related to all web based addresses generated for a specific virtual wallet. Because private keys enable spending of cryptocurrencies they must be kept secure. Private keys can be kept on computer files, but in some cases may be printed on paper as well.

Asset Protection in a Digital World

Some argue decentralized cryptocurrencies provide for accumulation of personal wealth that is beyond restriction and confiscation, even by powerful government forces. While the long term stability and security of cryptocurrencies can be debated the fact remains that many individuals, and even a few companies, are accumulating significant volumes of cryptocurrencies and eventually, those individuals and or companies may want to pass control over those assets to their heirs or assigns.

To Trust or Not to Trust

Broadly speaking, the holder of cryptocurrency has two options for transferring that currency. The first option depends on trusted third parties to oversee the transfer and the second is to consummate the transfer on the blockchain.

Under the first option the holder of the currency relies on state probate law to govern the transfer. That requires the cryptocurrency be moved from the digital realm into the legal realm. Clients who trust fiduciaries to handle their affairs will be comfortable with this option. Guidance for lawyers handling such transactions can be found in the proposed Fiduciary Access to Digital Assets Act (FADAA) which outlines the National Conference of Commissioners on Uniform Laws recommendations regarding the handling of digital assets in the legal realm. Indiana has adopted the FADAA but neither Ohio nor Kentucky has yet done so. Regardless, the Act Uniform Laws Committee's proposed version provides guidance.

To transfer cryptocurrency in the legal realm one need only entrust his or her private key to a fiduciary and provide that fiduciary with instructions regarding the distribution of the cryptocurrency upon death via a will or a trust. While a viable option in jurisdictions with a healthy respect for the rule of law and access to trusted fiduciaries, the foregoing process does entail significant costs in the form of legal and court fees and fees to fiduciaries.

The second option may be more attractive to individuals and entities operating in environments where the government and or others routinely flout the rule of law. In a jurisdiction where the rule of law is ignored, or applied unevenly, citizens and corporations may be attracted to the autonomous trustless blockchain platforms upon which cryptocurrencies are built to create mechanisms for the transfer of such currencies.

By leveraging the so-called "locktime" feature on the blockchain an owner of cryptocurrency can schedule the delivery of the currency to another person or entity (or portions of the currency to several persons or entities) at a preselected point in time. The owner can make the delivery contingent upon his or her death or simply the passing of a certain period of time.


Clients in possession of cryptocurrency need to plan for how that currency will pass to their heirs and/or assigns upon their death or when the affairs of an enterprise that owns such currency wraps up its affairs. The foregoing suggestions represent the proverbial tip of the iceberg regarding these issues. Anyone interested in an deeper dive into the topic can watch the video at the link below.

Blockchain Revolution

Anyone with serious questions or concerns regarding the passing of cryptocurrency should contact Benjamin, Yocum & Heather, LLC and schedule a time to discuss these issues in more detail.