Why Cryptocurrency Is One Of The Worst Assets To Inherit

At first glance, inheriting cryptocurrency from a deceased friend or family member seems like a pretty great windfall. Unless it's the Melania (Trump) meme coin, that is, which, as of this writing, has lost 98% of its value since launching in January 2025. On the other hand, there's Bitcoin. Often regarded as the flagship of cryptocurrencies, one unit of Bitcoin is currently worth around $117,000 in mid-August 2025, which is a considerable gain from its value of less than $12,000 just five years prior at the same time.

With that level of appreciation, a small early investment such as buying Bitcoin at its 2009 inception could make a beneficiary an instant millionaire. However, it's critically important for the benefactor to leave explicit instructions on how to access their cryptocurrency after they pass. It's not enough just to legally transfer ownership in a will. Otherwise, these valuable assets could be irretrievably lost. According to decrypt, approximately 20% of the existing supply of Bitcoin is already lost forever. Those who do inherit cryptocurrency should also keep in mind that it's treated like property for tax purposes and not like traditional currency.

Although proper estate planning is always an important aspect of reaching a certain age (you should have a will once you hit 18), it's particularly critical if your assets include cryptocurrencies. That's because crypto is protected in an impenetrable private key, which is like an alphanumeric password. Besides a private key, there's also a public key required to locate the cryptocurrency, and both may be stored a'la carte or in a password-protected electronic wallet, possibly with other crypto keys.

A well-crafted last will and testament may make it clear that you wish to transfer ownership of crypto holdings to heirs such as children. However, that document does absolutely nothing to help those children actually access the cryptocurrency assets. It's crucial to inform your heirs or a trusted advisor such as a lawyer that you own crypto and possibly even provide the proper credentials to access the tokens for safekeeping. Or alternatively, where the proper credentials can be located, like a safe or other hiding place. Finally, the necessary keys or crypto wallet access can accompany the estate documents themselves, to be proffered at the time of passing. 

Do keep in mind that whoever you tell about the crypto keys or wallet credentials will also have access to those funds at any time. For this reason, it's also worth considering the use of a custodial service instead, which can handle the transfer of crypto after your death. Some crypto investors are wary of custodial services because they've been a target for hackers in the past, but reportedly, security measures are substantial.  

So far, this article has focused on advice for someone bequeathing cryptocurrency, but what about if you're on the receiving end of that inheritance? Obviously, you'll want to obtain the credentials to access the crypto as soon as possible if that information isn't immediately provided. The longer you wait, the greater the possibility that private keys become lost forever or a bad actor uses them to steal the funds.

Additionally, note that the IRS treats crypto as property. That means that if the value of the cryptocurrency increases or decreases between the time that you inherit it and when you exchange the crypto for cash or spend it, you may have to account for an unrealized capital gain (or loss). That's not unlike stocks or real estate, but a natural inclination may be for some recipients to treat crypto like, well, currency. The IRS does not.

To be sure, it's never a bad thing to receive a sizable inheritance from a loved one, but cryptocurrency does present a unique set of access requirements to be aware of. Unlike a brokerage account filled with stocks and bonds, you can't simply produce a death certificate, will, or other court document to get possession of the necessary public and private crypto keys. No keys, no crypto, no matter what the intent of the decedent.