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Legal column: The private key to the crypto castle 

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By Jesse M. Hancox with The Teresa Rhyne Law Group,

It is said that a golden key can open any door. That is certainly not the case with cryptocurrency, where only your “Private Key” can open the door.

What is Cryptocurrency?

Cryptocurrency (“Crypto”) is a digital or virtual currency that uses complex math to ensure security. Crypto is not issued by a government or bank, and its design shields against inference and tampering. Crypto has become increasingly popular since its introduction, and with that popularity has come the need to include it in estate plans. If you own crypto, it is important to include it in your estate plan along with your other assets, and failing to do so can lead to expensive court proceedings (at best) or possibly the loss of your crypto altogether.

What do you mean I can lose all my crypto!?

The security of crypto is akin to an unbreakable vault full of gold (perhaps fool’s gold). This vault is under the digital eye of the world to prevent anyone from looting your vault. To open the vault, you need a special key—your Private Key. If you die without passing your Private Key along, the vault can never be opened again.

Where is my Private Key?

Private Keys are the digital codes to access your crypto assets. Your Private Keys are kept in a wallet, which can be digital or physical. Many people have what’s called a “Hot Wallet,” meaning that their crypto account is connected to the internet. They act similarly to an online financial account and often have apps that make buying and selling crypto easier. However, Hot Wallets are not viewed as the most secure way to keep your Private Key, and much like a real wallet, it’s not a great idea to keep a lot of your crypto in them. Also, Hot Wallets are provided by a third-party company, and the same level of trust is given to them as to a bank.

A more secure method of storage is the “Cold Wallet,” which is often a small electronic device you keep with you. Others choose a more analog approach and write their Private Key on a piece of paper or have it etched onto a metal card or coin.

How does estate planning help?

Whichever type of wallet you choose, your estate plan can be used to pass your crypto on just as easily as your other assets. The first step is to create your estate plan. A trust can give your trustee access to the Hot Wallet and be used to distribute your crypto according to your wishes. If you use a Cold Wallet, your estate plan can specify to whom the Cold Wallet is given, and the person who receives the Cold Wallet receives everything that goes with it.

The advantages of estate planning go even further when considering that if you are incapacitated, no one else may have access to your crypto wallet, and no one will be able to access your assets in an emergency. A properly drafted trust often directs your trustee to use your assets to take care of you if you are incapacitated. Further, during your incapacity, your trustee can actively administer your crypto, rather than letting it suffer potentially catastrophic losses.

What other options do I have?

While a proper estate plan is the surest method of properly transferring your crypto when you pass, each type of wallet has options. A few of the Hot Wallet services allow you to name a death beneficiary or agent, but most do not.

With a Cold Wallet, your options are even more limited as physical possession of the Cold Wallet is required, along with the understanding of its purpose, and how to use it to access your crypto. However, the largest hurdle for passing a Cold Wallet may be its high level of security; your loved ones may not even know it exists.

What shouldn’t I do?

You may have a great memory for remembering a 64-character string of letters and numbers using your “brain wallet,” but if you want to pass along your crypto when you pass, you must leave something more tangible. In other words, your memories cannot yet be passed along to your loved ones, including your memory of your Private Key.

Many crypto experts warn against using password and data manager services because of the regular occurrence of data breaches, meaning that the service was compromised and secure user information, such as Hot Wallet account information, made it into the hands of unauthorized persons.

The worst thing to do is not plan at all. Even though some (not all) Hot Wallet service providers will accept the direction of a probate court, the value of your crypto becomes public knowledge and subject to probate costs and attorney fees.


Albert Einstein said about education, “You don’t have to know everything. You just have to know where to find it.” When planning for your cryptocurrency, your family doesn’t need to know everything, but your estate plan should tell them how to find it.

Jesse M. Hancox is an associate attorney with The Teresa Rhyne Law Group, a PC with offices in Riverside and Paso Robles. Hancox’s practice emphasizes estate planning, trust administration, business succession planning, and general business matters.



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