Quick overview
Digital asset succession covers passwords, email, social media, cloud photo libraries, domain names, subscription services, and cryptocurrency holdings. In practice, it combines three tracks: a technical plan (how to store and share access), legal authority (will, trust, power of attorney, and a named digital executor), and tax/administrative follow-up (valuation, reporting, and transfer). According to the American Bar Association, many people lack a plan for their digital assets, which creates avoidable hurdles for families and fiduciaries (American Bar Association, Digital Assets resources).
Why this is different from traditional estate planning
Traditional estate plans typically focus on bank accounts, real estate, and investments. Digital assets add new layers:
- Account terms of service and privacy laws can restrict access even to an appointed executor. Many providers follow their own policies unless legally compelled. See the Uniform Law Commission’s guidance on the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA) for how states handle fiduciary access (Uniform Law Commission).
- Cryptocurrency can be either custodial (exchange-held) or noncustodial (self-custody with a private key or seed phrase). Loss of a private key means permanent loss of funds; unlike a bank account, there is usually no provider to contact to restore access.
- Some digital property has sentimental rather than monetary value (photos, messages, blogs) yet still deserves direction.
Practical steps — a 7-point checklist I use with clients
- Inventory assets: list usernames, account providers, device types, cloud services, domain names, NFTs, and custodial versus noncustodial crypto. Keep this inventory separate from passwords; store it as metadata pointing to a secure vault.
- Choose a digital executor: name someone tech-capable and trustworthy. Put the designation in your will or trust and in a digital asset addendum.
- Use a secure password manager: store logins, notes about two-factor authentication (2FA), and recovery instructions. Many password managers (1Password, Bitwarden) support emergency access or designated beneficiaries.
- Decide custody for crypto:
- Custodial exchange: document account, KYC info, and account recovery procedures. Exchanges often require probate or legal papers to transfer funds.
- Noncustodial (private key): never place seed phrases in a will. Use a hardware wallet and consider multi-signature (multisig) or splitting seed phrases across trusted locations (safes, safe-deposit boxes, or a specialist custodian).
- Use legal documents appropriately: incorporate digital asset language into a trust (for seamless transfer outside probate) or include a digital asset addendum with explicit authority. Grant a durable power of attorney that includes digital access for incapacity.
- Map tax and reporting implications: cryptocurrencies are property for federal tax purposes (IRS Virtual Currency Guidance). In general, inherited property typically receives a step-up in basis under tax rules, but heirs should confirm valuation and reporting requirements with a tax advisor.
- Communicate and update: tell your executor where the inventory and access tools live, and update the plan whenever you add services or change 2FA.
Crypto-specific recommendations (custody, keys, and heirs)
- Evaluate custody trade-offs: custodial services ease recovery for heirs but create counterparty risk; self-custody maximizes control but increases the risk of loss. For significant balances, consider a hybrid: keep operational funds in an exchange for liquidity and move long-term holdings to cold storage.
- Avoid writing seed phrases in a will or emailing them. Probate files are public in many jurisdictions; sensitive data can be exposed.
- Consider a trust or a qualified third-party custodian for large crypto holdings. Trusts can hold private keys or impose transfer rules that let trustees move assets without exposing seed phrases in probate.
- For high-value wallets, multisig arrangements (e.g., 2-of-3 signatures) let heirs recover funds if one key is lost. Professional crypto custody services and regulated custodians are increasingly available and provide estate-friendly handoff processes.
Legal and privacy limits you must know
- State laws and RUFADAA: The Revised Uniform Fiduciary Access to Digital Assets Act provides a framework many states adopted to allow fiduciaries access to digital assets consistent with account-holder intent. Check your state’s adoption and limits via the Uniform Law Commission (uniformlaws.org).
- Provider terms of service: platform rules (Google, Apple, Facebook, Twitter/X) still matter. Many platforms have legacy/legacy contact or deactivation options—document preferences.
- Federal privacy statutes such as the Stored Communications Act can complicate access to certain content. The combination of provider rules and privacy law means legal authority alone may not guarantee seamless access.
Example: a client case
A client held a significant amount of cryptocurrency across a hardware wallet and two exchanges. After an unexpected death, the family had no access: the hardware wallet’s seed phrase was undiscoverable and the exchanges required probate plus account verification. We prevented this with a three-step approach for other clients: designate a trustee in a revocable trust to hold the wallet, create an encrypted emergency kit in a password manager with an emergency contact, and register a digital executor in the trust. The result: heirs accessed estate funds without exposing seed phrases through probate.
Common mistakes and misconceptions
- Listing passwords in a will: wills become public during probate; never place secrets there. Instead, use encrypted storage or a trust.
- Believing banks/exchanges can always help: custodial platforms have KYC and legal processes that often require a court order.
- Forgetting 2FA: two-factor authentication is important, but if you die without recovery instructions, it can lock heirs out. Document backup codes and recovery methods securely.
- Assuming ‘‘one plan fits all’’: international accounts, multistate residency, and business accounts need specialized planning.
Sample language ideas (not legal advice)
- Trust clause example: “I grant my trustee full authority to manage, access, and transfer any digital assets, including control of electronic wallets, cloud accounts, and digital property, in accordance with my written digital asset memorandum.”
Note: Do not copy clauses into legal documents without attorney review.
Tools and services I typically recommend
- Password managers with emergency access (1Password, Bitwarden, or similar) for storing credentials and an encrypted digital asset inventory.
- Hardware wallets (Ledger, Trezor) for self-custody and cold storage, plus consider multisig solutions for larger holdings.
- A licensed estate planning attorney to draft trust language and power-of-attorney clauses that explicitly cover digital assets.
Tax and reporting basics
Cryptocurrency is taxable property for federal purposes (see IRS guidance on virtual currency). For an inherited crypto asset, beneficiaries typically receive a new basis equal to the fair market value at the decedent’s date of death (a ‘‘step-up’’ in basis), which affects later taxable gains or losses. Because tax rules change and state rules differ, work with a tax professional when transferring or liquidating digital assets.
Action plan: next 30 days (practical checklist)
- Create a written inventory of online accounts and digital property (no raw passwords). 2. Choose a digital executor and discuss responsibilities. 3. Set up or confirm emergency access in your password manager. 4. Decide custody strategy for crypto and document it. 5. Consult an estate attorney to add digital asset provisions to your will/trust and review local law.
Links and further reading
- Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA) — Uniform Law Commission: https://www.uniformlaws.org/
- American Bar Association — Digital Assets resources: https://www.americanbar.org/
- Related FinHelp guides: See our guide on Digital Estate Planning: Managing Online Accounts and Crypto for operational templates and Essential Estate Planning Documents Everyone Should Have for legal-document checklists.
Frequently asked questions
- Can my executor access my email and social media? It depends—some platforms provide legacy contacts or special tools; others require subpoenas or court orders. State law affects fiduciary authority (see RUFADAA).
- Is cryptocurrency included in a will? Yes, but avoid embedding private keys or seed phrases in wills. Use a trust or secure custodian for prompt transfer.
Professional disclaimer
This entry is educational and reflects best practices as of 2025. It is not legal or tax advice. Specific rules vary by state and by account provider. Consult a qualified estate planning attorney and tax advisor to implement a plan tailored to your situation.
