You've just inherited cryptocurrency. Maybe a spreadsheet. Maybe just a rumor that "Dad had some Bitcoin." Either way, the clock is running. This is the practical playbook for executors and heirs who need to find, access, value, and transfer inherited crypto without losing it or fumbling the tax treatment.
Inheriting crypto is different from inheriting a brokerage account in one crucial way: there is no backstop. No customer service line that can "just reset the password." If the deceased held coins on an exchange, there's a process, slow but real. If they held them in self-custody with only a seed phrase for protection, the coins are either recoverable or gone, and the difference is measured in minutes of searching a house.
The good news: Bitcoin and Ethereum are fungible, which makes valuation cleaner than NFTs and makes transfers more flexible. The bad news: the dollar amounts tend to be bigger, which means the tax stakes are higher and the scam targets on your back are brighter.
If you're the named executor, these steps are your roadmap. If you're the named heir and no executor has been appointed yet, you can still start on Step 1, but do not move, sell, or transfer anything until an executor is in place and an estate attorney is involved.
Screenshot every wallet balance, exchange account summary, and transaction history you find, dated, as early as possible. Fair market value at date of death determines estate tax liability and the heir's stepped-up cost basis. Establishing that value is much harder once assets start moving. Document first. Act second.
Most serious crypto holders use multiple wallets and multiple exchanges. Most have also dabbled in places they forgot about. Build the full inventory before you touch anything. Work through these sources:
Build a running spreadsheet. Columns: platform name, type (self-custody or custodial), account email or wallet address, chain, asset type, estimated balance, and current status (access confirmed, estate claim submitted, seed phrase located, pending). This spreadsheet is the case file the attorney, the CPA, and the heirs will all need.
For every self-custody wallet on your inventory, you need the seed phrase or the private key. Full stop. There is no administrative backdoor.
Seed phrases are usually 12 or 24 English words. Private keys look like long random strings or QR codes. Where to look:
If after thorough searching you cannot find a seed phrase for a self-custody wallet, the assets inside are effectively lost. This is a hard sentence to write to a grieving family, but it is the reality of self-custody. Document the wallet address and on-chain balance for estate records, note the loss for the accounting, and move on. Do not send the address to any "recovery service" that finds you on social media. Every single one of them is a scam.
If the phrase exists but a few words are smudged, torn, or missing, recovery is sometimes possible through reputable specialist services like Wallet Recovery Services, KeychainX, and Praefortis. They work on fixed fees or percentage agreements. Verify reputation through independent sources before engaging. Never send the full phrase to anyone over email or chat. A legitimate service works from a partial phrase, not a full one.
Coins held on an exchange are custodial, meaning the exchange controls the private keys. That's usually bad from a security standpoint, but it is the one thing that makes inheritance easier: exchanges have real, documented estate processes. You cannot access the account with a seed phrase, but you can reclaim the balance through the formal channel.
Standard documentation every major exchange will require:
Where to submit the claim by exchange:
Timelines vary. Coinbase and Kraken typically close estate cases in four to twelve weeks. Robinhood and Cash App can take longer. Keep a written log of every contact, every document sent, and every reference number received. Escalate in writing to the legal department if an exchange does not respond within 30 days.
Cryptocurrency valuation for estate purposes is cleaner than NFT valuation because liquid markets exist. For each holding, record:
The IRS accepts fair market value as determined by a reasonable method. For widely traded coins, the closing price on a major exchange on the date of death is defensible. For less liquid tokens, use volume-weighted average price across major exchanges, or engage a CPA with digital asset expertise for high-value positions.
When an heir inherits crypto, the cost basis resets to fair market value at date of death. If the deceased bought Bitcoin at $400 in 2016 and it was worth $70,000 when they died, the heir's basis is $70,000. Years of appreciation are wiped clean for capital gains purposes. But only if the valuation is documented. Without it, the IRS defaults to the deceased's original purchase price, and the heir eats decades of tax on gains they never realized. This one step can be worth more than everything else combined.
This step does not apply to every estate, but when it does, it matters. Before transferring anything, check for:
If the deceased was active in DeFi and the positions are complex, hire someone who knows what they're doing. A bad interaction can cost the estate real money. Paying a crypto-native CPA or a technical consultant $500 to unwind a complicated position is cheap insurance.
Once the holdings are accessible, documented, and unwound, there are two paths: transfer in kind or sell and distribute cash.
Each heir sets up their own wallet (exchange or self-custody). The executor sends their allocated assets directly from the estate's control to each heir's wallet. Benefits: heirs maintain the stepped-up basis and future upside exposure. Drawbacks: each heir needs to understand crypto custody.
Practical notes:
The executor liquidates the holdings through an exchange, and distributes USD to heirs. Benefits: simpler for heirs who don't want crypto exposure; clean accounting. Drawbacks: taxable event at the estate level if the assets moved in price between date of death and sale (though the gain or loss is usually small since you typically sell close to the inherited basis).
Liquidation is often the right default when one or more heirs are crypto-skeptical or when the will directs proceeds to be divided equally and even splits of crypto would be awkward.
Inherited crypto is included in the deceased's gross estate at fair market value. Federal estate tax applies only to estates above the exemption (about $13.6 million per individual in 2026), but state estate taxes have lower thresholds in Massachusetts, Oregon, Washington, Hawaii, and a handful of others.
On the heir's side: record the stepped-up basis. When the heir eventually sells, capital gains or losses are calculated from that stepped-up basis, not the deceased's original cost. This is reported on Form 8949 and Schedule D of the heir's personal return in the year of sale.
If the estate is large, the DeFi activity was significant, or the holdings were in dozens of positions, hire a CPA with digital asset experience. The penalties for misreporting crypto are real, and the IRS has added crypto-specific questions to Form 1040 since 2020. This is not a DIY moment.
If after exhaustive search there is no seed phrase, no private key, and no custodial platform holding the assets, a few narrow options remain:
A fair estimate is that three to four million Bitcoin are permanently lost on the blockchain, many of them inside inherited estates exactly like this one. The asymmetric truth is brutal: thoughtful planning during life takes hours; the consequences of skipping it last forever.
Everything in this guide is a process your family will have to run when you're gone. You can eliminate most of the pain in a single afternoon. A digital assets clause in your will, a letter of instruction naming every wallet and exchange, a secure physical record of seed phrases, and a simple "if I die" document with instructions for your executor will save your family weeks of stress and often hundreds of thousands of dollars. Start with the planning guide, then make it real.
When someone passes with a significant crypto portfolio, word travels. Families routinely receive contact from people claiming to help "recover" funds or "unlock" wallets. Every single one of these unsolicited messages is a scam. Common patterns to ignore:
Rule: if anyone contacts you about the deceased's crypto, treat every single message as hostile by default. Initiate all real estate claims through official exchange help pages, not through emails sent to you. Never share seed phrases, private keys, or 2FA codes with anyone, including people claiming to be customer support.
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