How to Handle Cryptocurrency

Cryptocurrency presents unique challenges in estate administration because access depends entirely on private keys or seed phrases — there is no central authority that can reset a password or recover funds. If the deceased stored cryptocurrency in a self-custody wallet (hardware wallet like Ledger or Trezor, or a software wallet) and you cannot locate the private key or seed phrase (typically a 12 or 24 word recovery phrase), the funds may be permanently inaccessible. Search thoroughly for: handwritten seed phrases (often on a piece of paper or metal plate stored in a safe), hardware wallet devices, notes in a password manager, and encrypted files on the computer.

If the cryptocurrency was held on an exchange (Coinbase, Kraken, Gemini, Binance.US, etc.), the process is more straightforward. Contact the exchange's support team and request their deceased account holder process. You will typically need to provide: a certified death certificate, letters testamentary or letters of administration, government-issued ID for the executor, and proof of the deceased's identity. Processing takes 2 to 8 weeks depending on the exchange. Coinbase, for example, has a dedicated deceased account process accessible through their support portal.

Cryptocurrency is treated as property by the IRS and is subject to estate taxes at fair market value on the date of death. The estate will need to report the value of all crypto holdings. If you inherit cryptocurrency, you receive a stepped-up cost basis to the date-of-death value, just like stocks or other investments. If you are unfamiliar with cryptocurrency, consider hiring a crypto-savvy financial advisor or accountant before selling or transferring assets — mistakes in handling crypto can result in lost funds or unexpected tax liabilities. Do not share private keys or seed phrases with anyone you do not trust completely.