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Crypto Law/Level IX · Death, divorce and disputes/9.1 Inheritance/Lesson 7

Leaving instructions without leaving keys

How to tell heirs where crypto is and how to reach it without handing anyone the secret that controls it too early, and how platform settings and scams affect the plan.

Education, not legal, tax or investment advice. Crypto law differs between countries and states and changes often. Check the current rules where you live with a qualified lawyer or tax adviser before you act.

The lean path

The cheapest, lowest-tax, simplest and most private route the law allows, best first. Each step names the rule it rests on and the condition that keeps it lawful.

  1. Cost nothing: write a letter of instruction listing platforms, login emails, device locations and where secrets are kept, without the secrets themselves; review and date it whenever holdings or devices change.
  2. Use free platform tools that outrank a will: under Fla. Stat. §740.003, a direction given through a custodian’s online tool that the user can change at any time overrides a contrary will; record each setting in the map.
  3. For email that holds exchange logins, Google’s Inactive Account Manager can share chosen data with up to 10 people after inactivity; Google may delete accounts inactive for at least two years.
  4. Split control at no cost with a BIP 39 passphrase stored apart from the recovery phrase, or SLIP-0039 shares; each layer is a new way to lose access, so the map must explain how they fit.
  5. Never pay upfront to recover an inheritance: the FTC describes refund and recovery scams that demand payment first; anyone asking heirs for a recovery phrase or fee fits that pattern.

MaterialsFla. Stat. §740.003, on online tools that override a willBIP 39 (recovery phrases and the optional passphrase) and SLIP-0039 (Shamir shares)HMRC Cryptoassets Manual, page CRYPTO25000, with its search checklistFTC consumer guidance ‘Refund and Recovery Scams’

Wonder

  1. What can be written down for a family without giving away the coins?
  2. Who should be able to see the instructions, and when?
  3. How do heirs avoid being scammed once they start looking?

Explore

  1. Crypto inheritance planning needs two kinds of information: a map, meaning what exists, where it is and what kind of wallet or account holds it, and the keys, meaning the secrets that let someone sign. A map alone can be shared fairly widely: it tells an executor that an exchange account exists or that a hardware wallet in a drawer controls coins. Keys can be held narrowly or split. The common failures are merging the two, by writing the recovery phrase into the map or the will (lesson 9.1.2), or leaving no map at all, so heirs never learn the holdings exist (lesson 9.1.1).
  2. A letter of instruction is a non-binding document that sits beside a will. For crypto it can list each platform and the email used to log in; each wallet type and device and where it is kept; which coins and networks are involved; whether a passphrase or multisig is used and how many keys are needed; which advisers know the setup; and where the tax records are. It can say where the secrets are kept without reproducing them. HMRC’s checklist in CRYPTO25000, which points personal representatives to bank statements, emails, wallet apps and personal papers, shows what a searcher has to do when no map exists.
  3. Some wallet standards help keep the map and the keys apart. Under BIP 39, a recovery phrase can be combined with an optional passphrase; every passphrase produces a valid wallet, but only the correct one opens the funded wallet. A phrase stored in one place and a passphrase in another means neither finder alone can spend. SLIP-0039 instead splits a secret into shares with a threshold, such as any 2 of 3, held by different people or in different places. Each layer adds a barrier to theft and also a new way to lose access, so the map has to explain how the layers fit together.
  4. For accounts with custodians, statutes based on RUFADAA give priority to the user’s own directions. In Florida, §740.003 lets a user direct a custodian, through an online tool, to disclose or not disclose digital assets to a designated recipient; if the tool lets the user modify or delete the direction at all times, that direction overrides a contrary direction in a will, trust or power of attorney. So settings chosen on a platform can outrank the estate plan, and the map should record them. Where a platform offers no beneficiary option, as Coinbase says of its individual accounts, the will and the probate process decide.
  5. Where the instructions are kept changes who sees them and when. In California, for example, a person with the key can open a decedent’s sole-name safe deposit box and inventory it before an executor is appointed (Probate Code §331). Instructions also go stale: a map written for one hardware wallet is wrong once the coins move. And heirs following a map attract fraud. The US Federal Trade Commission warns that refund and recovery scammers contact people and ask for payment up front to get money back; anyone asking an heir for a recovery phrase or a fee to ‘unlock’ an inheritance fits that pattern.
  6. A dry run tests the map without the keys. A trusted person is given only the instructions, not the secrets, and asked to explain step by step what they would do: which court papers they would need, which platform forms they would fill in, where they would look for each secret and whom they would call. Each point where they get stuck is a gap. The second half of the test is to confirm that nothing in the map alone lets them move a coin. Repeating the review when holdings, devices, advisers or family circumstances change, and dating each review, keeps the map current.

Key facts

  • Under Fla. Stat. §740.003, a direction given through a custodian’s online tool that the user can modify or delete at all times overrides a contrary direction in a will, trust or power of attorney.
  • BIP 39 allows a recovery phrase to be combined with an optional passphrase, and every passphrase generates a valid wallet.
  • SLIP-0039 splits a wallet’s master secret into shares so that a specified minimum number is needed to reconstruct it.
  • Coinbase’s help pages say it does not currently support naming a beneficiary for individual accounts.
  • The FTC describes refund and recovery scams as schemes that promise to get back lost money if the victim pays first.
  • HMRC’s Cryptoassets Manual gives personal representatives a checklist for identifying a deceased person’s cryptoassets, including bank statements, emails, devices and personal papers.

Exercise nine, six, three, one

9CollectList up to 9 pieces of information an heir would need to find and reach your crypto, or that of a hypothetical holder (some lists are shorter), such as platform names, login emails, device locations, passphrase locations or adviser contacts.
6ClusterSort them into 6 categories: what exists, where it is held, how to prove authority to a platform, where the secrets are stored, who to contact for help, and tax and record information.
3DistillReduce the 6 categories to 3 groups: safe to put in a map that several people can read, to be held by one trusted person or place, and never to be written in the map at all.
1CrystallizeWrite 1 sentence explaining, in your own words, the difference between leaving a map of your crypto and leaving its keys.

Fact check

Dates, figures and claims checked against the published sources listed below.

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