Cryptocurrency in Probate: Navigating Digital Assets

A growing number of people own a considerable amount of cryptocurrency. Forbes Magazine estimates that the total global value of cryptocurrency is approximately $1.75 trillion (February 2024). While still not well understood by everyone, cryptocurrency is an asset class that is likely here to stay. This raises an important question: How is a digital asset like cryptocurrency handled in Probate? The short answer is that there is no technical legal distinction between cryptocurrency and other “property” investments in probate—though there are some unique practical differences. Here, our Fort Lauderdale probate lawyer provides a comprehensive overview of the key things to know about cryptocurrency and probate in Florida. 

Background: What is Cryptocurrency?

Investopedia defines cryptocurrency as a “tradeable and fungible token representing an underlying asset.” What does that mean? Broadly speaking, cryptocurrency is a digital asset. It could be thought of as a form of “digital money” or “digital gold,” depending on your perspective. It can also be quite valuable. Each Bitcoin is worth more than $40,000 (February 2024—and there are many thousands of other cryptocurrencies. Unlike traditional currencies issued by governments, cryptocurrencies operate on decentralized networks based on blockchain technology. The blockchain is a distributed ledger that records all transactions across a network of computers. Notably, there is no central authority—like a government or bank—that controls cryptocurrency. 

Note: For the purposes of federal securities law and investment regulations, the Securities and Exchange Commission (SEC) classifies cryptocurrency as a commodity. 

Probate Law: Cryptocurrency Treated Like Other Property 

When a person passes away in Florida, the probate process is used to determine who will inherit their property and assets. Cryptocurrency—like other property—will go through probate if other estate planning considerations are not made. As explained by the Internal Revenue Service (IRS), “for federal tax purposes, digital assets are treated as property.” Probate law is much the same: Cryptocurrency and other digital assets are considered to be a form of property. If a person uses their will to leave cryptocurrency to a loved one, that can be distributed after probate is completed. If there is no will—and no other viable estate planning considerations—that a person is considered to be intestate. Their cryptocurrency and other digital assets—including things like non-fungible tokens (NFTs)—will pass to their closest heir as determined by Florida state law. 

You Can Put Cryptocurrency in a Trust in Florida

A trust is an estate planning tool that can be used to help ensure that assets are passed to an heir outside of probate. There are many potential advantages associated with using trusts. You can place cryptocurrency in a trust. A trust can best be understood as a legal arrangement that allows a trustee to hold and manage assets on behalf of beneficiaries. It is an approach that offers privacy, avoids probate, and can provide clear instructions for managing the assets. By transferring cryptocurrency into a trust, a person can help to ensure that it is handled according to their wishes. 

The Legal Takeaway

Cryptocurrency is property. The SEC classifies it as a commodity. In that sense, a person’s cryptocurrency holds are considered to be similar to their holding in other commodities, such as gold or silver. For the purposes of probate law, there is no legal distinction made between cryptocurrency and other tradeable digital assets and other property. 

There are Many Practical Probate Considerations for Cryptocurrency (Digital Assets)

While cryptocurrency and other digital assets like NFTs are not treated differently under the law, there are major practical differences that need to be considered when navigating the probate process. If a person does not have a proactive plan in place for their cryptocurrency, there could be major issues. Here are three key practical differences: 

• Identification: Unlike traditional assets, cryptocurrencies can be incredibly difficult to locate. They exist entirely in the digital realm and are not tied to physical entities like banks or tangible assets. If the deceased did not leave clear records, identifying their cryptocurrency holdings can be a daunting task. Cryptocurrencies are stored in digital wallets—which are accessed through private keys. Without knowledge of these wallets or the keys, it can be hard to even find these assets. 
• Access: Access is another major area of concern. Even if the existence of a cryptocurrency holding is known, accessing it can be nearly impossible without the right cryptographic keys. Unlike bank accounts or physical safes, there is no “master key” or central authority that can grant access. The importance of proactive estate planning cannot be overstated. You need an estate plan that provides information on how to access digital wallets. Failure to do so can result in assets being permanently locked away and, as such, inaccessible to heirs.
• Understanding: Finally, another challenge is that Cryptocurrencies are a relatively new and complex asset class. Many potential heirs may not fully understand how they work. The lack of understanding can lead to challenges in managing these assets—especially in a fluctuating market that requires timely and informed decisions. Further, executors and beneficiaries might struggle with the technical aspects of handling cryptocurrencies, such as transferring ownership, converting them into fiat currency, and understanding tax implications.

The Bottom Line: Even though there are no major technical legal differences, the reality is that cryptocurrency and other digital assets can be especially challenging to deal with in probate. Whether you own cryptocurrency and you are making an estate plan or you are trying to navigate cryptocurrency in an ongoing probate, an experienced Florida attorney can protect your interests. 

Contact Our Broward County Probate Lawyer for Immediate Help 

At The Law Offices of Odelia Goldberg, our Fort Lauderdale probate lawyer is a skilled, experienced, and detail-driven advocate for clients. If you have any questions or concerns about cryptocurrency or other digital assets and probate, we are here to help. Call us now or contact us online for a completely confidential, no-obligation case evaluation. From our Fort Lauderdale office, we provide probate law support in Broward County and throughout the surrounding area in South Florida.