Crypto And Estate Planing Series Part 3: Giving The Executor Or Personal Representative Access To Private Keys At Death

Introduction

The ownership of crypto assets depends on who holds the private key.  As a crypto owner, you hold your private key during your lifetime.  On death, however, your assets will be administered post-death by the trustee of your (the decedent’s) living trust or the executor of your will (also known as the decedent’s personal representative, or “PR”).

If you own crypto assets, the PR must be given access to your private key to administer those assets as part of the post-death administration process. If private keys are lost, they cannot be replaced – and correspondingly the value of the associated crypto assets cannot be accessed for administration.  Therefore, the process for delivering the private key to the PR must be carefully considered.

Questions addressed in this Part 3 include:

1. What storage method or methods does the decedent use?
2. Who holds the private key during the decedent’s lifetime?
3. How is the private key delivered to the PR?
4. If there is more than one PR, what other steps should be taken?

What Storage Method(s) Does the Decedent Use?

The first question to ask is how are private keys controlling crypto assets currently stored? The storage method used by the decedent during life will impact and inform how the private keys may be delivered at death.

In Part 1 of the Series, we highlighted the types and differences in storage methods.  We learned that at one end of the spectrum if security is top priority, then cold wallets or offline storage methods are recommended; at the other end of the spectrum, if convenience for transacting is needed then hot wallets or online storage methods may be preferred.  And of course, you can always have a combination of both, keeping the majority of your crypto assets in cold storage (for security) and a smaller portion in hot storage (for accessibility and speed to transact).  Each person’s situation, needs, and risk appetite will be unique so a clearcut uniform process for post-death access to private keys for administration is a challenging, not “one size fits all”, conversation.

Nonetheless, some simple examples illustrate why knowing the storage method matters:

• Example 1: Chris Crypto uses a hot wallet offered by the Coinbase exchange to store his private key. Coinbase is a third party service provider that holds Chris’ private key and enables him to transact his crypto assets via his username and password through Coinbase’s online web portal.  Since his private keys are held by Coinbase, at Chris’ death the PR could gain access to his wallet (or private keys) by knowing his username and password.  Thus, the PR would need to know (a) he owns crypto assets; (b) his private key storage method – here, Coinbase wallet; and (c) his username and password.[1]
• Example 2: Betty Bitcoin uses a physical hardware device manufactured by Ledger as her offline wallet to store her private key. She stores her Ledger in a combination safe which sits in her bedroom closet.  At Betty’s death, the PR would need to know (a) she owns crypto assets; (b) her private key storage method – her Ledger wallet; (c) where her Ledger wallet is located – her home in a safe; and (d) how to open the safe – or the safe’s combination.

While there are numerous possibilities, the point is to demonstrate that the type of storage method used by the crypto owner matters to determine what next steps in the process may be.

Who Holds the Private Key During the Decedent’s Lifetime?