One of our listeners recently asked what happens to your crypto on exchanges when you die. How will his spouse or kids get his crypto when he dies? Our listener has roughly $500,000 in Solana, Ethereum, Bitcoin, Shiba inu, and Doge, held on exchanges: Coinbase, Crypto.com, and EToro.
Inheriting from crypto exchanges is similar to banks
Just like a bank or brokerage, you submit death certificate, letters form the court appointing the estate’s representative, claim forms, etc. Then the exchange will process the claim – sometimes slowly. Sometimes they won’t know what they are doing, and you’ll have to lead them by the nose. (This happens even with traditional banks and brokerages). Sometimes the customer service representative tells you that you need certain forms, and you spend a couple of weeks preparing the forms. Then after submitting the forms, another representative tells you to submit something different. This is all too common.
The result of this process is that your administrator or executor will have access to your crypto through the exchange account. However, it is still unclear whether an executor will collect the crypto in-kind (having the actual coins transferred to your executor) or if the crypto will be liquidated (cutting a check to the executor). My instinct is that it will be distributed in-kind. This matters, because receiving coins in-kind means the executor needs to know what to do with them.
Make sure your heirs know the crypto exists!
This process only works if your heirs or executor knows where to look for your crypto and submit the claim. Most exchanges/apps are not sending out 1099s or statements. Your heirs and executor won’t have many clues to work off of. There won’t be a piece of mail from Coinbase that tells your heirs to look for your account there. They may be able to hunt through your email to find information, if they can get to it.
The solution is to either mention your crypto to your executor and heirs or leave a memo that your crypto exists (and where to look for it).
Don’t bother listing crypto in your will. Just like personal property, it changes too frequently. Your holdings in 2021 will be totally different in 2023. You don’t want the costly and time-consuming task of changing your will every time your accounts change. Your best bet is leaving a memo or letter.
Though we usually discuss more broad crypto topics like wallets, hardware and software, this question was specific to exchanges. Even though I’d still like to write a book on cryptocurrency for estate planning, I am a leery of writing something that could be obsolete by the time I finish it. But we shall see…