How to Include Cryptocurrency in Your Estate Plan

Overview

Cryptocurrency presents new challenges in estate planning. In this episode of Life Lessons with the Rutkowski Law Firm, estate planning attorney Michael Rutkowski explains how crypto assets like Bitcoin can be structured within your estate plan, even though they can't be retitled into a trust. He discusses how key-based access works, the importance of successor trustees, and how to ensure your digital assets are passed on securely and according to your wishes.

Key Takeaways:

• Cryptocurrency assets like Bitcoin can’t be titled in the name of a trust due to current legal restrictions.
• These assets typically use a multi-key system (e.g., 2-of-3 keys needed for access).
• The successor trustee should hold one of the keys and be named in your trust or will for direction, even if it’s not legally binding yet.
• Two of the three keys (often held by an individual, a company, or a trustee) are required to access funds in most crypto storage systems.
• Best practice: engrave keys on steel plates and store them securely, such as in your estate planning binder.
• Although not legally binding, naming crypto recipients in your estate documents gives clear guidance to your trustee.
• There’s risk: without legal enforcement, a trustee could theoretically ignore your wishes, making trustworthiness essential.

Full Transcript

Hello, and welcome back to Life Lessons with the Rutkowski Law Firm.

Today, we're going to talk about how to fund your trust using cryptocurrency.
Today, I have our trustee advisor, Mike Rutkowski, law attorney.

Mike, welcome back.
Thanks for having me, as always.
As always.

All right, let's get into it. Cryptocurrency — it's a thing.
Yeah, it is.
It clearly is. There's lots and lots happening.

You know, maybe 10 years ago, we thought this would just be a thing that kind of went away, but it's a thing.
It's a thing.

And so the question that we're getting asked all the time as people are going through the estate planning process and they have some cryptocurrency is: How do I tie this all to my trust to make sure that in the event I pass away, someone can have access to it, right?
That's always the big question when it comes to all assets.

Whether we're talking about retirement accounts, your house, bank accounts — we’ve got to make sure that everything has a plan so that in the event something happens to you, whether you're incapacitated or passed away, someone has access to these assets so they can go to who you want them to.

So now we've got this thing, this digital currency called cryptocurrency. Comes in all kinds of forms.
I'm not going to sit here and say that I'm an expert in all the different varieties of cryptocurrency, but here are the conversations that I have had, which I want to just share with you as an estate planner.

I typically connect with wealth advisors or people in the industry to figure this out.
Recently, I had a great conversation with a concierge, they call themselves, of Bitcoin.
Bitcoin is probably one of the largest cryptocurrencies out there that most people are familiar with.

So I can walk you through what we discussed in our conversation of how we're going to tie this all to an estate plan.

The interesting thing with cryptocurrency is there are typically these things called keys.
I don't know exactly what that means, but that's not important here.

What's important is that this is how someone’s going to have access to the cryptocurrency asset.

With Bitcoin, they have a three-level — call it multi-factor — where there are going to be three keys:

• One key is held by the individual who buys the cryptocurrency
• Another key is held by the company that manages the cryptocurrency for you
• The final key — we’ve got to figure out what to do with that

Because anyone with two out of the three keys can access the assets.

The unfortunate part of crypto is: we can't just retitle it into the name of the trust.
It's not gonna happen — no one allows it to be done.

So what we’ve got to figure out is: how do we make sure that this goes to who we want it to go to in the event we pass away?

Like with anything, we typically map out a plan.
We say our retirement account’s going to be split between our kids or spouse first or whatever it is.
But with the cryptocurrency, we do that through their key system.

And whether that’s a system where they have two keys or three keys, who holds those keys is going to be the determining factor of where these assets go when I pass away.

You following me still?
So in a trust — does this go in a trust? Like it’s just a will? In your will?

Yeah, so here's my recommendation as an estate planner:
We lay out — whether in a will or a trust — who’s going to get this asset.
But at this point in time — February of 2025 — that is not legally binding.

To me, it’s still worth putting in that direction, though — where you want it to go — in the event this does all come full circle with U.S. laws and estate planning.

But what that will do — here’s what we agreed to with Bitcoin, at least —
What that’s going to do is give the trustee direction of what you want to happen.

Also probably an important thing to do:
Give the other key — that third key — to who you’re appointing as successor trustee.

Because they’re going to be handling everything else.
So if that successor trustee holds the third key, that could be how we’re going to figure this all out.

The trust or the will is going to say what you want to happen to it.
It’s up to the trustee to follow that.
But between the successor trustee and the company, they will have access to the asset.

If there’s three keys, does that mean that the trustee who has one of the keys needs to contact another person with a second key to actually access it?
Or as long as you have one key, you can get into it?

You gotta have two out of the three.
In a three-key system, you’ve got to have two out of the three.
In a two-key system, you have to have both keys.

So you better not lose a corner of one.

What we’ve been told is that a lot of people are engraving these into steel plates.
Helpful so you don’t just lose the key.

Keep it with your estate plan.
So typically you get a binder.

If you have cryptocurrency, you can keep that engraved steel plate — or whatever you’re going to use to identify the key —
Keep that in your estate planning binder would be a safe place to put it.

But yeah, two out of three.
So your successor trustee plus the company — that could give them the access to then give it to who you want it to go to.

The unfortunate part at this point in time —
You’re just literally telling the successor trustee: give this cryptocurrency to my kids or whoever you want.

Right, it’s like a handshake agreement.
Like, I hope he actually does it.
But if he wants to just keep it all, he can keep it all too.

So I think there’s a lot of upside right now with crypto —
And again, I’m not the person to speak to that —
But there’s also some inherent risk in it too.

Those are the things that we’re just going to have to be mindful of as we transition into this digital currency space.
And as we navigate the changes in that — I mean, that’s just where it sits today.

Well, thank you so much, Michael. I appreciate your insight on how you're navigating the wild west of cryptocurrency.

If you would like to understand more about how your cryptocurrency can go into your estate plan — to ensure that third key or second key gets to a trustee — please give us a call. We’d be happy to help.

If you are having this experience, and maybe you’ve done this before and have a way forward, we’d love to hear how you're making sure that if something happens to you, your cryptocurrency continues down the line of where it needs to go.

Share in the comments.
Thank you all so much.

Thank you, Michael.
If you would like to contact us, the phone number is below.
Please give us a call. We’d be happy to help.