Crypto Estate Planning: Why Digital Assets Are Easy to Lose

Crypto estate planning has become an urgent issue as Bitcoin and other cryptocurrencies move from fringe investments into the mainstream. Millions of Americans now own digital assets, either directly or through trading platforms. Yet many investors have not addressed a basic question: how heirs will actually access those assets after death.

Unlike bank accounts, brokerage accounts, or retirement plans, cryptocurrency introduces estate planning risks that are easy to overlook. A single missing password, lost seed phrase, or undocumented access method can cause assets to disappear permanently.

In a recent conversation, estate planning attorney Harry Margolis explained why crypto is uniquely vulnerable to being lost at death—and what investors should consider before it is too late.

Why Crypto Estate Planning Is Legally Simple but Practically Risky

From a legal standpoint, cryptocurrency is not fundamentally different from other property. If a will leaves assets to a spouse, children, or other beneficiaries, crypto is included.

The challenge in crypto estate planning is not ownership. It is access.

“Your executor is supposed to carry out your wishes,” Margolis explained. “But how do they actually access the account?”

Crypto assets are often controlled by private keys, seed phrases, or passwords that exist nowhere but in the owner’s memory. If those credentials are lost or never shared, no court order can recover the assets.

That means an executor can have full legal authority and still be unable to retrieve the crypto.

The Three Hurdles in Crypto Estate Planning

Margolis said crypto estate planning typically involves three overlapping issues, all of which must be addressed:

Estate documents

Wills and trusts determine who inherits the asset.

Platform rules

Many investors hold crypto through exchanges, which operate under contractual rules that govern account access after death.

Access information

Private keys, seed phrases, passwords, and device access must be discoverable when needed.

Failing to address any one of these can derail the entire plan. Even when a will is clear, platform rules may override expectations. Executors must comply with exchange procedures that often require documentation, identity verification, or account settings established while the owner was alive.

Why Self-Custodied Crypto Carries the Highest Risk

The greatest danger in crypto estate planning lies with self-custodied assets, such as crypto held in personal digital wallets that rely on seed phrases.

One lost phrase can permanently lock away the funds.

Margolis noted that this has already happened on a large scale. “There are people who have already lost great fortunes in Bitcoin because they lost their keys,” he said.

In these cases, the loss is irreversible. There is no customer service department, no recovery process, and no legal workaround.

Why Trusts Are Not a Cure-All for Crypto

Trusts are often promoted as a way to avoid probate and streamline inheritance, but crypto can complicate that strategy.

A trust only works if assets are properly titled in its name. With cryptocurrency—especially self-custodied assets—that process is not always straightforward.

“How that works with Bitcoin or other crypto isn’t always clear,” Margolis said, adding that even experienced planners may struggle with the mechanics.

Without careful implementation, a trust can create a false sense of security in crypto estate planning.

Why Simpler Crypto Exposure May Reduce Estate Risk

Given these complications, Margolis suggested that some investors reconsider how they hold crypto.

Exchange-traded funds tied to Bitcoin or other digital assets may offer an alternative. While ETFs carry market risk and management costs, they are held within traditional brokerage accounts that already have established inheritance procedures.

For some investors, that trade-off may be worthwhile.

“This certainly will be a lot easier,” Margolis said.

Why Crypto Estate Planning Matters Now

Crypto ownership continues to grow, and many holders are aging into the years when estate planning becomes unavoidable.

Without proactive crypto estate planning, heirs may discover that assets they assumed existed are effectively gone.

The risk is not hypothetical. It is already happening.

As Margolis put it, crypto does not forgive disorganization. If access instructions are missing or incomplete, the assets may as well not exist.

Key Takeaways

• Crypto can be legally inherited but practically inaccessible without planning

• Private keys and seed phrases must be securely documented and discoverable

• Exchange rules can override expectations if not addressed in advance

• Self-custodied crypto carries the highest estate risk

• ETFs or traditional platforms may simplify inheritance for some investors