The inheritance crisis faced by American cryptocurrency holders — the risk of losing millions of dollars

In the United States, over 50 million adults hold cryptocurrencies, and their asset scale is enormous. However, many of these assets are not incorporated into estate plans. When a cryptocurrency holder passes away, without proper preparation, there is a high risk that assets worth millions of dollars could be lost forever. Although the legal system in the U.S. is rapidly evolving, many families face uncertainty regarding how to inherit this new asset class.

Reasons Why Cryptocurrency Inheritance Issues Are Becoming Serious in the U.S.

While some early adopters hold large amounts of Bitcoin (BTC), there is an increasing number of cases where older relatives are encouraged by grandchildren to invest in cryptocurrencies. As intergenerational holdings of digital assets expand, estate planning professionals are facing new challenges.

Christopher Nekvind, Director of Global Learning Operations at Cannon Financial Institute, points out that many advisors lack sufficient knowledge about cryptocurrencies. “There are situations where asset managers are asked about something they know far less about than the holders, which undermines the trustworthiness of the advisor,” he explains.

For estate planning professionals in the U.S., cryptocurrencies remain an unfamiliar territory. Unlike inheritance of real estate or investment trusts, digital assets involve complex layers such as private key management, wallet storage methods, and trustee authority.

Actual Problems at the Time of Holder’s Death—From Private Key Loss to Confusion of Heirs

Azriel Behar, a partner in the estate planning group at Farrell Fritz law firm in New York, has experienced many cases where millions of dollars worth of cryptocurrency did not pass to heirs due to improper planning. He emphasizes the importance of designating someone with the knowledge to handle these assets.

Generally, the main issues faced by heirs include:

Loss of Private Keys: Access to cryptocurrencies like Bitcoin is entirely controlled by private keys. If the long alphanumeric code to access a wallet address is lost, the assets are permanently locked.

Difficulty in Locating Storage: Many cryptocurrency holders store account information digitally via email or cloud drives, avoiding paper documents. For heirs, finding this information can be as challenging as a “detective job.”

Inexperienced Trustees: Assets can be easily lost due to delays in probate, private key loss, or trustees unfamiliar with digital assets.

Rapid Asset Value Fluctuations: Cryptocurrencies are highly volatile, and heirs may need to make quick decisions or sell quickly. If probate takes 6–10 months, they may miss these opportunities.

How Legal Reforms in the U.S. Have Changed Cryptocurrency Inheritance

In the past, the legal status of digital assets in the U.S. was unclear. Questions about whether they are subject to inheritance or probate caused concern for many families.

In recent years, the situation has changed significantly. The enactment of the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA) has led many states to update rules regarding wills and trusts to accommodate digital assets.

Behar explains the significance of this legal change: “This update for trustees allows executors and trustees to access digital assets just like traditional securities. With proper documentation, custodians like Coinbase can no longer legally refuse access. Previously, they had no such legal obligation.”

However, this reform alone does not solve all problems. Even with clearer laws, inheriting cryptocurrencies remains more complex than other asset classes.

Practical Measures for Heirs to Protect Their Assets

There are many immediate steps that U.S. cryptocurrency holders should take.

Designate a Trustworthy Person: Clearly specify someone capable of handling social media accounts, online transactions, and blockchain assets. “Even a well-organized uncle or cousin may be confused about how to extract Bitcoin from a wallet,” warns Behar. Appointing someone with some expertise in digital assets is crucial.

Record and Store Account Information: Create a list of important account details and notify heirs or store it securely in a safe deposit box. “I’ve seen heirs desperately searching through files or computer folders for hours,” Behar notes.

Use of Trusts: In the U.S., especially in New York, establishing a trust and designating it as the transferor at death is recommended. This allows the trust’s trustee to access assets immediately after death without court intervention.

Utilize LLCs (Limited Liability Companies): If quick liquidity is needed or market opportunities are to be seized, setting up an LLC to hold cryptocurrencies and then transferring the LLC itself into a trust can be effective. This method simplifies and speeds up asset transfer compared to moving cold storage wallets.

Notify Custodians of the Trust: It is important to register with custodians like Coinbase, BitGo, or Fireblocks that the trust is the owner of the assets. This provides a legal basis for heirs to claim access in the future.

Do Not Include Cryptocurrency Details in Wills: Wills become public records in the U.S., accessible to anyone. Including private keys or wallet addresses in a will risks exposing sensitive information, so it should be avoided at all costs.

The Danger of No Planning—What U.S. Cryptocurrency Holders Must Do Now

Many cryptocurrency owners in the U.S. neglect estate planning for these assets. Dying without a will means an appointed administrator will handle the distribution, but this can cause issues unique to cryptocurrencies.

Heirs face complex probate procedures, during which cryptocurrency prices continue to fluctuate. Without proper planning, families risk losing substantial assets and burdening heirs with significant stress.

Now is the optimal time for U.S. cryptocurrency holders to plan. With the legal status of digital assets clarified, consulting lawyers and financial advisors to utilize trusts, LLCs, and other appropriate structures is essential to ensure the secure inheritance of valuable digital assets for the next generation.