Crypto inheritance checklist

An estimated 3-4 million BTC are permanently lost due to forgotten seed phrases, dead hard drives, and unprepared heirs. If you die without a plan, your self-custodied crypto likely joins that pile. This checklist walks through every practical step — technical, legal, and educational — to ensure your family can actually access what you leave them.

Work through each section and check off items as complete. Revisit annually (seed phrases deteriorate; exchange accounts and policies change; family situations evolve). This isn't legal advice — consult an estate attorney for anything complex — but it's the blueprint most experienced crypto holders use.

Phase 1: Technical preparation

Before anything else, get your self-custody house in order.

• Consolidate wallets: use 1-2 primary hardware wallets (Ledger, Trezor) instead of 8 scattered hot wallets.
• Write down all seed phrases on metal backup (Cryptosteel, Blockplate, or equivalent — paper degrades and burns).
• Store seed phrases in at least two physically separate locations (home safe + bank safety deposit box + trusted family member).
• Test restore: take a $100 wallet, erase the device, recover from seed. Verify the process works before you need it.
• Document exchange accounts: list every exchange, the login email, and note that 2FA will need to be reset by the estate.

Phase 2: The 'Letter to Heirs' document

Prepare a detailed document that explains everything to someone who has never used crypto. Don't store the letter with your seed phrases — separate them so a single discovery doesn't compromise security.

• What you own and approximate total value (updated annually).
• Wallet types (hot, cold, exchange) and where funds live.
• Physical location of hardware wallets and seed phrase backups.
• Step-by-step instructions for a non-crypto-literate person: 'Go here, click this, enter this.'
• Contact info for a trusted crypto-savvy friend or advisor who can help the family navigate.
• A list of NOT-DOs: don't click any 'support' links; don't paste seed phrases online; don't rush.

Phase 3: Legal structure

Self-custody + no legal planning = your crypto may never reach your heirs even if they find the seed phrase.

• Include crypto in your will (specifically mention digital assets; list wallets by type and approximate balance).
• Consider a revocable living trust for estates >$250K in crypto — avoids probate, keeps details private.
• Name a Digital Executor (can be separate from traditional executor) with crypto experience.
• For estates >$5M, consult an estate attorney about generation-skipping trusts and grantor-retained annuity trusts (GRATs) for crypto.
• State-specific: some states (Delaware, Florida, others) have passed Fiduciary Access to Digital Assets acts — know your state's framework.

Phase 4: Ongoing maintenance (annual)

Inheritance plans go stale fast. Schedule a 1-hour review every January.

• Verify seed phrases are still physically readable in their storage locations.
• Update wallet balance and asset list in the Letter to Heirs.
• Test that current family liaison can find and understand the documents.
• Update for any new wallets, exchanges, or DeFi positions opened in the last year.
• Close unused exchange accounts (fewer accounts = fewer access points to manage).

Phase 5: Security tradeoffs — convenience vs protection

There's tension between 'easy for heirs to access' and 'secure from theft while I'm alive.' The right balance: cold storage seed phrases split across trusted parties OR time-locked smart contracts (Casa, Unchained) that enable access after a set period of inactivity OR multi-sig setups where heirs hold 1-of-3 keys. All of these require more planning than 'write seed phrase on paper, hope it's found.' The peace of mind is worth the effort.

DeFi positions and staking — the hardest inheritance problem

Standard crypto inheritance planning focuses on wallets and exchanges. DeFi positions are a different problem entirely. If you have liquidity positions on Uniswap, staked ETH on Lido, or AAVE borrows, your heirs don't just need your seed phrase — they need to understand what those positions are and how to unwind them without getting liquidated or missing unlock periods.

Document every active DeFi position in the Letter to Heirs: platform name, URL (bookmarked), what the position is, approximate value, and any time locks or risks. For borrowing positions (AAVE, Compound), note the health factor and what happens if it drops below 1.0. If your heir misses a margin call because they didn't know the position existed, the liquidation penalty alone can cost thousands.

The cleanest solution for large DeFi estates: wind down active positions before major life events (serious illness, major surgery) and consolidate to simpler on-chain assets your heirs can manage. A $200K Uniswap v3 LP position is inheritance-hostile. Two hardware wallets holding BTC and ETH with metal seed backups are inheritance-friendly.

Tax implications for heirs receiving crypto

In the US, inherited crypto receives a stepped-up cost basis to the fair market value on the date of death. If you bought 2 BTC at $10,000 and it's worth $100,000 when you die, your heir's cost basis is $100,000 — not $10,000. They owe zero capital gains tax on $90,000 of appreciation. This is one of the most powerful estate planning tools available for appreciated assets.

The step-up applies to crypto held directly by the decedent. Crypto in a trust, depending on structure, may or may not receive the step-up. This is where an estate attorney earns their fee — the difference between a properly structured revocable living trust and improper titling can cost heirs tens of thousands in unnecessary taxes on a $500K crypto estate.

Outside the US, inheritance tax treatment varies widely. UK has no capital gains step-up; the heir inherits the original cost basis. Canada and Australia have similar carryover basis rules. If your heirs are in a different country than you, the tax planning gets more complex. Document where each asset was acquired and the original purchase price — your heirs' tax advisors will need this.

Multi-signature wallets as an inheritance structure

A 2-of-3 multisig (Unchained Capital, Casa, or self-managed via Sparrow Wallet) is the most technically robust inheritance structure available. You hold 2 keys; the heir holds 1 key. While you're alive, you control the wallet with your 2 keys. After your death, the heir's key plus the institutional backup key (Unchained or Casa) gives them the 2-of-3 required to access funds without needing to recover your keys.

Cost for Unchained inheritance: $250/year for the personal plan. Casa: $350-$2,500/year depending on tier. For holdings above $100K, the annual cost is trivial relative to the inheritance protection provided. The institutional key never has direct access to funds — it requires co-signing with your heir's key. This structure survives your death, hardware failures, and seed phrase loss simultaneously.