Imagine you have died without leaving your heirs the password to your bank account or writing down how to access the account. Now imagine that your bank account allows only ten attempts to enter the correct password. After the tenth incorrect attempt, your bank account seizes up, encrypts itself, and is gone forever. You have now locked your heirs out from receiving assets they may be relying on to pay your final expenses or maintain their quality of life you worked hard to achieve.
Thankfully, many bank accounts or mobile banking apps permit transfer-on-death designations or have facial recognition capabilities. For cryptocurrency and digital asset wallets, however, the possibility of being locked out of your account is a reality any owner of cryptocurrencies or blockchain assets should be aware of. Here are some real examples:
The Real Cost of Lost Passwords
Stefan Thomas wrote his password for his digital asset wallet on a piece of paper which was later lost. He has only ten attempts to correctly input his password to access his account containing $220 million in digital assets. On the tenth attempt, his digital asset wallet will encrypt itself and be lost forever.
Gerald Corren, a 30-year-old CEO, held $190 million in bitcoin and other digital assets within his digital wallet on his encrypted laptop. Gerald unexpectedly died having failed to share the password to his digital wallet. Without that password, Gerald’s heirs are unable to access them.
Why Digital Assets Require Special Planning
As an investor in digital assets, whether you’re a CEO with millions invested or a do-it-yourself investor trying to build your portfolio, having a strategy in place to ensure that your digital assets pass to those you want is critical. Based on the nature of cryptocurrencies and digital assets, courts and other entities have few options to retrieve and transfer these assets, which emphasizes the need for proper planning in the event of an investor’s death.
As an owner of digital assets, consider which type of storage is best for your digital assets, who can access them, and what information needs to go in your estate planning documents to safeguard them.
Understanding Hot and Cold Wallets
Digital assets can be stored in a “hot” or “cold” wallet. A hot wallet is a storage space for digital assets accessible via the internet or an internet-enabled device. Hot wallets are the most popular digital asset storage form. Their connection to the internet makes them great for making transactions but they are more susceptible to bad actors. A cold wallet does not have a connection to the internet and is stored on a piece of hardware, like a USB stick. Cold wallets are much more secure than hot wallets because they are not connected to the internet and are tangible.
Granting Access to Protect Your Heirs
Granting carefully selected people access to your digital assets can provide security to your heirs at your death. If someone other than you has access to your digital assets, they can assist the administrator of your estate in accessing the assets. Well-drafted estate planning documents can provide further safeguards for your digital assets.
Get Expert Help With Digital Asset Estate Planning
A tech-savvy estate planning and tax attorney can help you avoid leaving your heirs in the same situation as Stefan’s and Gerald’s families. The attorneys at Paule, Camazine & Blumenthal can answer your questions and help you take a modern approach to your estate planning and tax needs.
*The author is grateful for the assistance of Caroline Vaaler, Saint Louis University School of Law student, anticipated graduation May 2026, in the preparation of this article.
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