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Cryptocurrency can be transferred through an estate plan just like other property. However, transferring legal ownership is only half the problem. Your heirs must also be able to locate and access the assets without exposing the information that protects them.
To leave cryptocurrency to your heirs in Louisiana, you need three things working together: a valid estate-planning document, legally authorized decision-makers, and a secure access plan.
Why Cryptocurrency Requires Different Estate Planning
With most traditional assets, a succession representative can contact a bank or financial institution, provide the necessary court documents, and take control of the account.
Cryptocurrency may work differently.
Some cryptocurrency is held through an exchange or another third-party custodian. Other assets are held in self-custody wallets controlled by private keys or recovery phrases. If no one can locate those credentials after the owner’s death, a perfectly valid will may not be enough to recover the property.
On the other hand, making access too easy creates the risk that someone could steal the assets during the owner’s lifetime. Effective cryptocurrency planning must balance accessibility with security.
First, Determine How Your Cryptocurrency Is Held
The first step is identifying the custody arrangement for each asset.
Cryptocurrency Held Through an Exchange
With third-party custody, an exchange or other custodian controls the private keys associated with the account. The owner normally accesses the account with a username, password, multifactor authentication, or another verification method.
After the owner dies, the succession representative may need to follow the custodian’s formal estate procedure. That could require a death certificate, court-issued letters of administration, a judgment of possession, or other evidence showing who has authority to act.
If the platform offers a beneficiary, legacy-contact, or post-death transfer feature, review it carefully. These features and their terms can change, so they should be checked periodically and coordinated with the rest of the estate plan.
Cryptocurrency Held in a Self-Custody Wallet
With self-custody, the owner controls the private keys. The wallet may be a mobile application, desktop program, browser extension, hardware device, or another form of storage.
The SEC’s cryptocurrency custody guidance explains that losing a private key or recovery phrase can result in permanent loss of access. No court order can recreate a missing seed phrase.
A hardware wallet can improve security, but the device alone is not enough. Your heirs may also need the PIN, recovery phrase, compatible software, and instructions identifying the correct wallet and blockchain.
Create an Inventory Without Including the Keys
Prepare an inventory that tells your representative what exists and where to begin. Depending on your holdings, it may identify:
- Exchanges and custodial accounts
- Hot wallets and wallet applications
- Hardware wallets and other cold-storage devices
- Wallet addresses and relevant blockchain networks
- Staked assets, decentralized-finance positions, or liquidity pools
- Nonfungible tokens and other blockchain-based property
- Devices used for authentication
- The location of transaction histories and tax records
The inventory should help someone locate the assets without giving that person immediate power to transfer them.
Do not place private keys, seed phrases, passwords, or wallet PINs in your will. A will may eventually be filed in a public succession record. The will can identify who should receive the cryptocurrency, but sensitive access information should be maintained separately through a secure process.
Private keys and recovery phrases also should not be stored in ordinary email, an unencrypted document, or a note labeled “cryptocurrency password.” Anyone who obtains those credentials may be able to transfer the assets without permission.
Use a Valid Louisiana Will or Trust
A special “digital will” does not replace a Louisiana testament prepared in the form required by state law. Cryptocurrency should be coordinated with a valid Louisiana last will and testament, a properly created trust, or both.
The estate-planning document should address questions such as:
- Who receives the cryptocurrency?
- Should the assets be divided or sold?
- Should a particular beneficiary receive specific digital assets?
- May the succession representative retain volatile assets during administration?
- Should cryptocurrency intended for a minor or financially inexperienced beneficiary remain in trust?
- Who has authority to hire technical, tax, or cybersecurity professionals?
A trust may be useful when a beneficiary is young, has limited financial experience, or should not receive immediate control of a substantial cryptocurrency portfolio. However, merely mentioning cryptocurrency in a trust does not solve the access problem. The ownership and custody arrangements must be coordinated with the trust documents.
For more information about when a trust may be appropriate, read Why Trusts Should Be Part of Your Estate Plan.
Give the Proper People Legal Authority
A secure access plan should identify the people who may act during incapacity and after death.
A Louisiana contract of mandate can authorize someone to manage digital assets while the owner is living. Under Louisiana Civil Code Article 3026, a mandate generally is not terminated merely because the principal becomes incapacitated, unless the parties agreed otherwise.
However, the mandate does not continue indefinitely after death. Louisiana Civil Code Article 3024 provides that the mandate and the mandatary’s authority terminate upon the principal’s death. At that point, authority generally shifts to a succession representative, trustee, or other person authorized under the estate plan.
Louisiana law gives a succession representative substantial authority over a decedent’s digital accounts. Louisiana Code of Civil Procedure Article 3191 authorizes a succession representative, subject to a valid testament or court order, to control, manage, distribute, or terminate digital accounts belonging to the decedent.
That legal authority is important when dealing with an exchange or other custodian. Still, it cannot recreate a private key for a self-custody wallet. Legal authority and practical access must therefore be planned together.
Build a Secure Access Plan
The access plan should allow the right person to obtain the necessary credentials after incapacity or death without giving any one unauthorized person an easy opportunity to steal the assets.
Possible arrangements include:
- Keeping the asset inventory and the recovery information in separate secure locations
- Storing a hardware wallet separately from its recovery phrase
- Using a secure physical vault or carefully selected digital-storage system
- Giving the fiduciary instructions for locating the credentials without revealing the credentials in the estate-planning documents
- Using a properly designed multisignature arrangement for significant holdings
- Identifying a trusted technical adviser whom the fiduciary may contact
There is no single arrangement that works for every cryptocurrency owner. The proper structure depends on the value of the portfolio, the custody method, the owner’s technical knowledge, and the abilities of the intended heirs.
Avoid transferring private keys to beneficiaries during your lifetime merely so they will “know where everything is.” A person with the private key may be able to move the cryptocurrency immediately, and blockchain transactions usually cannot be reversed.
Preserve Tax and Transaction Records
Cryptocurrency planning also requires good recordkeeping. The IRS treats digital assets as property, not as currency, for federal tax purposes.
Records should identify:
- The type and quantity of each digital asset
- Acquisition dates
- Purchase prices and other basis information
- Transfers between wallets
- Mining, staking, or other income
- Prior sales and exchanges
- The fair market value of the assets at death
Inherited property generally receives a basis equal to its fair market value at the owner’s death, subject to applicable federal tax rules. Because cryptocurrency prices can change rapidly and assets may trade on several platforms, documenting the date-of-death value is particularly important.
The succession representative should preserve transaction histories even if the beneficiary plans to retain the cryptocurrency. Those records may later be needed to calculate gain or loss. Our discussion of tax considerations in Louisiana estate planning explains why basis planning can matter even when an estate is far below the federal estate-tax threshold.
Choose a Representative Who Can Handle the Assets
The person receiving the cryptocurrency does not necessarily have to be the person responsible for administering it.
A succession representative or trustee should understand the importance of security, privacy, accurate recordkeeping, and following the estate documents. If the fiduciary does not have the necessary technical knowledge, the documents can authorize that person to retain qualified assistance.
Families also should be alert for scams. Information that someone owned cryptocurrency can attract fraudulent recovery services, phishing attempts, and people claiming that they can locate missing assets. Private keys and seed phrases should never be entered into an unfamiliar website or provided to someone simply because that person claims to be helping the estate.
Review the Plan Regularly
Cryptocurrency arrangements can become outdated quickly. Owners change exchanges, replace hardware wallets, create new addresses, participate in new protocols, and modify security procedures.
Review the plan whenever you:
- Open or close an exchange account
- Add a significant wallet or digital asset
- Replace a hardware device
- Change the location of recovery information
- Begin staking or using decentralized-finance platforms
- Change the intended beneficiary or fiduciary
- Revise your will, trust, or mandate
The review should confirm that the estate-planning documents, asset inventory, access procedure, and actual holdings still match.
Field Law Can Help You Leave Cryptocurrency to Your Heirs in Louisiana
Leaving cryptocurrency to your heirs in Louisiana requires more than writing down a wallet password. The estate plan must transfer ownership, authorize the appropriate people to act, protect sensitive credentials, and give the family a practical way to locate and administer the assets.
Field Law helps Louisiana clients coordinate cryptocurrency and other digital assets with their wills, trusts, mandates, and succession plans. We can help build a plan that protects access during your lifetime while giving your representative a workable path after your death. Contact Field Law to schedule a consultation.
