Why Cryptocurrency Is Different From Everything Else in the Estate
Most assets an executor handles have an institution behind them. A bank can look up an account. A brokerage can find shares. A pension has an administrator. Cryptocurrency breaks that pattern, and the break is the whole story.
There are two kinds of crypto ownership, and which one you are dealing with determines almost everything that follows:
- Custodial (held on an exchange). The deceased had an account with a company like Coinbase, Kraken, Gemini, or Binance.US. The exchange holds the actual keys; the account is a claim against the exchange, much like a bank balance. An executor recovers this the way they recover other financial accounts -- with documents.
- Self-custody (held in a private wallet). The deceased controlled the keys directly, through a hardware wallet (a small physical device), a software wallet app, or simply a written-down recovery phrase. There is no company to call. Whoever holds the keys holds the coins.
Before you do anything else, figure out which fork you are on. The rest of this guide is organized around it.
One legal point up front: the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA) has been adopted in nearly every state. It gives executors and administrators a legal right to access a deceased person's digital assets, including crypto accounts, when they have the proper authority. RUFADAA is what makes an exchange release an account to you. But notice what it cannot do -- it cannot force math. A hardware wallet that needs a PIN does not care what a court ordered. Legal authority opens doors at companies; it does nothing against a self-custody wallet.
Step 1: Find Out Whether Crypto Even Exists
Crypto is easy to miss because it often generates no monthly mail and no obvious paper trail. Look for these signals:
- Apps on the phone or computer -- Coinbase, Kraken, Gemini, Binance.US, MetaMask, Trust Wallet, Exodus, Ledger Live, and similar.
- Emails -- search the deceased's inbox for exchange names, "your order," "login alert," "verification code," "wallet," and "seed phrase."
- A password manager -- crypto users frequently store exchange logins and wallet notes in 1Password, Bitwarden, LastPass, or a browser's saved passwords.
- Hardware wallets -- small USB-like devices, often by Ledger or Trezor. They may be in a drawer, safe, or safe deposit box.
- Seed phrases -- a handwritten list of 12 or 24 words, sometimes stamped into a metal plate. This is the master key. Treat any such list as if it were cash.
- Tax returns -- recent returns include a digital-asset question, and exchange activity may be reported. A prior return is strong evidence crypto existed.
- Bank and card statements -- transfers to an exchange, or purchases labeled with exchange names, show where to look next.
Add anything you find to the estate inventory immediately, even if you do not yet know the value or how to access it.
Step 2A: Claiming Crypto Held on an Exchange
If the crypto sits on an exchange, you are on familiar executor ground. The exchange holds the keys and will release the balance to a documented estate representative.
What Exchanges Typically Require
Requirements vary by company, but most ask for a similar package:
- A certified death certificate
- Court documentation of your authority -- letters testamentary if there was a will, or letters of administration if there was not
- A government-issued photo ID for you as the estate representative
- A signed letter of instruction stating where the assets should be sent
Because most exchanges do not offer beneficiary designations, there is usually no shortcut around probate for a solely owned account. The account is part of the estate, and the estate representative claims it.
How the Major Exchanges Handle It
- Coinbase publishes a dedicated process for a deceased family member's account, started through its Help/support center. You submit the death certificate and estate documents, and Coinbase's team reviews before releasing or transferring the balance.
- Kraken routes these requests through its Compliance team; you initiate by contacting support and are guided through the document requirements.
- Other U.S. exchanges (Gemini, Binance.US, and others) follow broadly similar document-driven processes through their support or compliance channels.
Whether the exchange transfers the crypto in kind (moving the actual coins to a wallet or account you control) or liquidates it to cash for the estate depends on the platform and what you request. Ask before you file, because the choice has tax and logistics consequences.
Timeline and Practical Notes
These reviews are manual and can take weeks to a few months, especially if documents need to be corrected. A few tips:
- Do not let the account sit unmonitored. If you have legitimate access to alerts, watch for unauthorized activity and report it to the exchange.
- Keep every submission and confirmation. If a coin's value swings during the process, you will want a clear record of dates.
- Only ever use the exchange's official, published contact channel. Impersonation scams are common (more on that below).
Step 2B: Recovering Self-Custody Crypto -- the Hard Case
If the deceased used a private wallet, the recovery phrase or private key is not a way to access the asset -- it is the asset. Find it and you have the crypto. Lose it and the crypto is gone, no matter how clear your legal authority is.
Where People Keep the Keys
- A hardware wallet device plus the PIN, and ideally the backup seed phrase
- A written seed phrase -- 12 or 24 words on paper, in a fireproof safe, in a safe deposit box, or stamped into a metal backup plate
- A password manager entry containing the phrase or wallet file
- A software wallet on a phone or laptop, protected by a device password or app PIN
Search thoughtfully and thoroughly. Many people split a seed phrase across locations or leave a note pointing to it. Estate planning attorneys sometimes hold sealed instructions. Check with the deceased's lawyer if there was one.
When the Keys Cannot Be Found
Be realistic with the family. If the seed phrase and PIN are truly gone, there is no customer-service line and no court order that recovers self-custody crypto. Industry estimates put the amount of permanently lost Bitcoin in the millions of coins, most of it from exactly this situation. It is painful, but knowing it early prevents good money from being thrown after unrecoverable coins.
A Blunt Warning About "Recovery Services"
The moment it becomes known that a family is trying to recover a lost wallet, scammers appear. Protect yourself with three hard rules:
- Never share a seed phrase or private key with anyone -- not an exchange, not a "recovery expert," not a support agent. Legitimate parties never need it.
- Never pay an upfront fee to an unsolicited person promising to recover a wallet. This is the single most common crypto scam aimed at grieving families.
- Only use official channels. Type an exchange's address yourself; do not follow links from emails or DMs that claim to be "estate support."
Step 3: Value the Crypto as of the Date of Death
For both the estate inventory and taxes, you generally value each holding at its fair market value on the date of death. Crypto is volatile, so record the specific date and the price source you used (a reputable exchange or price index), and keep a screenshot.
If the estate is large enough to file a federal estate tax return, the executor may be able to elect an alternate valuation date six months after death for the whole estate. That is an estate-level decision with trade-offs -- flag it for the estate's tax professional rather than deciding on the fly.
Step 4: Understand the Tax Picture
This is general information, not tax advice, but two points matter for almost every estate:
Inherited Crypto Usually Gets a Step-Up in Basis
The IRS treats cryptocurrency as property. Like other capital assets, inherited crypto generally receives a step-up in basis to its fair market value on the date of death. In plain terms: if the deceased bought Bitcoin for $5,000 and it was worth $45,000 on the date of death, the heir's cost basis becomes $45,000. If the heir sells right away near that price, there is little or no capital gain to tax. The appreciation during the deceased's lifetime is not taxed to the heir.
If the heir holds the crypto and sells later, they owe capital gains tax only on the change in value after the date of death.
The Retirement-Account Exception
Crypto held inside a retirement account -- for example a self-directed IRA that holds digital assets -- does not get a step-up. Retirement accounts follow their own distribution and inherited-account rules, which are based on withdrawals rather than capital gains. Treat crypto in an IRA as a retirement asset first and a crypto asset second.
Selling Inside the Estate
If the executor liquidates crypto during administration, the sale can generate a small gain or loss relative to the date-of-death value, reported on the estate's income tax return. Coordinate the timing and reporting with the estate's tax preparer, and keep clean records of every transaction date and price.
A Practical Checklist for Executors
- [ ] Determine custodial vs self-custody for every holding you find
- [ ] Search phone, computer, email, and password manager for exchanges and wallets
- [ ] Look physically for hardware wallets and written seed phrases
- [ ] Check recent tax returns for the digital-asset question and exchange activity
- [ ] For exchange accounts: gather the death certificate, letters, ID, and instruction letter, then use the exchange's official deceased-account process
- [ ] For self-custody: secure any seed phrase or device immediately and store it safely
- [ ] Record date-of-death value and price source for each holding
- [ ] Add everything to the estate inventory
- [ ] Never share keys; never pay upfront "recovery" fees; use official channels only
- [ ] Loop in a tax professional on basis, sale timing, and any retirement-account crypto
How SwiftProbate Can Help
Cryptocurrency is one of the easiest assets to overlook and one of the hardest to recover, which is a bad combination for an executor working under deadlines. SwiftProbate is probate task-management software that helps you organize the estate: our inventory prompts remind you to search for exchange accounts, hardware wallets, and seed phrases, keep a dated record of each holding's value, and track the documents each exchange asks for. It helps you stay organized and understand the steps -- it is not a law firm and does not give legal or tax advice. For questions specific to your situation, especially anything involving significant value or complex tax treatment, talk with a qualified attorney or tax professional.
This article is for informational purposes only and is not legal advice. Consult a qualified attorney for guidance specific to your situation.