Your executor can't inherit what they can't find

Quick answer: You need a will or trust that names your digital assets, a durable power of attorney, and a separate letter that tells your executor where everything is. Never put a seed phrase in the will. Wills usually become public record. Talk to an estate attorney in your state, because the rules vary.

The sock drawer problem

Picture a man who bought bitcoin in 2017 and moved it to a hardware wallet in 2019. He tells his wife it's "taken care of." He dies at 58. She finds a small device in a desk drawer. It has a PIN. She doesn't know the PIN, doesn't know there's a recovery phrase, and doesn't know the exchange account he used to buy it was never closed.

Nothing in that story requires bad luck. It's the default outcome of owning crypto and telling nobody the details.

Crypto doesn't behave like a brokerage account. Nobody at a bank will notice you've died and send a letter. If you hold it yourself, whoever has the recovery phrase owns the coins, and without it they're gone for good. Your family can lose real money without anyone doing anything wrong.

I've written before about how your own filing system is the biggest threat to your crypto. Inheritance is where that threat comes due.

The documents, in order of importance

1. A will or revocable living trust that mentions digital assets. Your will names your executor and gives that person legal authority. Ask your attorney to include a clause that covers digital assets by name, including cryptocurrency, exchange accounts and the devices that hold them. Most states have adopted a version of a law called RUFADAA, which gives a executor a legal path to your digital property when your instructions are clear. It opens the door. It doesn't hand over a key you never left behind.

A living trust can keep things out of probate and out of public view. But a trust only controls what has been put into it, and exchange accounts are usually titled to you personally. Your attorney can tell you whether to retitle accounts or assign them. Don't guess on this one.

2. A durable power of attorney with digital asset authority. This covers the other way you can disappear: a stroke, an accident, a long hospital stay. Someone you trust can then manage your accounts while you're alive but unable to act. Remember where it stops. A power of attorney ends at death. It's not a substitute for a will.

3. A letter of instruction. This is the document that actually saves the day, and it's the one most people skip. It's not legally binding. It's a plain letter, written to your executor, that says what you own and where to look.

What goes in the letter (and what doesn't)

Write it like you're briefing a person who is grieving and has never heard the word "wallet."

• Every exchange or platform you use, with the email address attached to each account
• Every wallet, with its type and where the physical device is kept
• Where the recovery phrase backup is stored, described by location only
• How two-factor authentication is set up, and which phone or app holds it
• The name of your attorney and your CPA
• A rough note of what you bought and when, if you have it

Now the hard rule. Don't write the recovery phrase in the will. Once a will is filed with a probate court, it's generally open to anyone who asks. Don't put it in an email to yourself either, and don't put it in a note on your phone.

Keep the phrase where a thief can't casually find it and your executor can eventually reach it. A fireproof safe at home works for many families. The letter says the safe exists. Your attorney can hold the combination, or a sealed copy of the letter, so no one person has the whole picture sitting in a drawer.

A safe deposit box sounds smart and sometimes isn't. After a death, banks can restrict access until the court gives the executor authority, and that can take weeks. Ask your attorney how it works where you live.

The single points of failure

Most lost crypto isn't lost to hackers. It's lost to boring dependencies.

Your phone holds the authenticator app. The phone dies, or gets wiped, and the exchange account is locked behind a code nobody can generate. Your email account is the recovery route for everything, and your executor can't get into that either.

Walk through your own setup and ask what happens if this one thing disappears. If the answer is "everything's locked," fix that this month. Print backup codes. Store them with the letter, not on the device they protect.

What your executor will need to show

Even with perfect paperwork, exchanges aren't fast. Expect to provide certified copies of the death certificate and what's called letters testamentary, the court document that confirms your executor's authority. Each platform has its own process. Some take weeks.

Your executor will also need your cost basis, which means what you paid and when. Inherited property is generally treated differently for tax purposes than something you sold while alive, and the IRS treats crypto as property. Exactly how that plays out is a question for a CPA, not a magazine. But a CPA can only work with records, so leave records.

Do a dry run

This is the step that separates a plan from a good intention. Sit down with your spouse, or whoever will serve as executor, and walk through the letter together. Don't hand over any keys. Just ask, "If I weren't here tomorrow, could you find the accounts using only this?"

You'll find the gaps in twenty minutes. Fix them. Then set a reminder to review everything once a year and after any major change, like a new wallet or a new exchange.

One more thing about timing. When word gets around that a family has crypto, scammers show up pretending to be recovery services. Warn your heirs ahead of time. Careful people get caught by those scams too, and a grieving family is the easiest target there is.

Leave it better than you found it

A man who stacks the chairs before he leaves the party doesn't leave the cleanup to his host. Your estate works the same way. A wife or a grown son shouldn't have to turn into a detective in the worst month of their lives.

If you're still getting your footing with the asset itself, start with Bitcoin, explained for somebody who skipped the last decade. Then book an hour with an estate attorney. A few hundred dollars of paperwork is cheap next to a coin you can never recover.

Write the letter this week.