Probate and Cryptocurrency: What Executors Need to Know in Texas

Cryptocurrency does not work like a bank account. There is no customer service line to call when the account holder dies. There is no institution that will hand over the funds when you present a death certificate and letters testamentary. If the person who held the private keys is gone and nobody knows where to find them, that digital wealth may be gone permanently.

Probate and cryptocurrency in Texas present challenges that the legal system was not originally designed to handle. But the assets are real, the values can be significant, and executors have a legal obligation to account for them.

Is Cryptocurrency Treated as Property in Probate?

Yes. The IRS classifies cryptocurrency as property, not currency, under IRS Notice 2014-21. That means it is subject to the same probate rules as any other personal property in Texas. If the deceased owned Bitcoin, Ethereum, or any other digital asset, those assets are part of the probate estate and must be identified, valued, and distributed.

Texas adopted the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA), which provides a legal framework for executors and trustees to access certain digital accounts.

However, RUFADAA has significant limitations when it comes to cryptocurrency. The act primarily addresses custodian accounts (like email and social media), and many crypto platforms have their own terms of service that may restrict access even when a court order is presented.

Why Is Cryptocurrency So Difficult to Handle in Probate?

Several unique characteristics make crypto assets different from traditional property:

• Private key dependency. Cryptocurrency is accessed through private keys or seed phrases. If the deceased stored these in a hardware wallet, on a piece of paper in a safe, or in their memory alone, the executor must locate them. Without the keys, the crypto is inaccessible. No court order can unlock a blockchain wallet.
• No centralized custodian (in many cases). If the crypto is held in a personal wallet rather than on an exchange like Coinbase or Kraken, there is no company to contact. The assets exist on the blockchain, and only the person with the keys can move them.
• Volatility. Crypto values can swing dramatically in a single day. The executor has a fiduciary duty to manage estate assets prudently, which means they may need to make time-sensitive decisions about selling or transferring volatile assets.
• Discovery challenges. Unlike bank accounts that appear on statements, crypto holdings may not be immediately visible. The executor may need to search email accounts, check bank statements for transfers to exchanges, or examine hardware devices to identify what the deceased owned.

What Should the Executor Do First?

If you are the executor of an estate that includes or may include cryptocurrency, here is a practical roadmap:

Search for evidence of crypto ownership. Look for exchange account confirmations in email, bank or credit card statements showing transfers to platforms like Coinbase, Binance, or Kraken, hardware wallets (small USB-like devices), and any written records of seed phrases or passwords.

Secure the assets immediately. Cryptocurrency is vulnerable to theft. If you find private keys or access credentials, do not leave them exposed. Transfer the assets to a secure, estate-controlled wallet or account as quickly as possible.

Determine the date-of-death value. The executor must establish the fair market value of each crypto asset as of the date of death. This is used for both the estate inventory and the stepped-up cost basis that beneficiaries will use for future tax calculations. Use reputable pricing sources like CoinMarketCap or CoinGecko, and document the value with screenshots or data exports.

Report the assets to the court. Cryptocurrency must be included in the estate’s inventory filed with the probate court. Under the Texas Estates Code, the executor is required to file an inventory, appraisement, and list of claims within 90 days of qualifying.

File required tax returns. The estate may owe income tax on any crypto that was sold or exchanged after the owner’s death. The estate’s income is reported on IRS Form 1041. If the crypto was held until distribution to beneficiaries, those beneficiaries receive a stepped-up cost basis to the date-of-death value.

What If the Crypto Is on an Exchange?

If the deceased held crypto on a centralized exchange, the executor will typically need to:

• Contact the exchange’s estate or bereavement department
• Provide a death certificate, letters testamentary or letters of administration, and government-issued identification
• Comply with the exchange’s identity verification process
• Wait for the exchange to process the transfer (this can take weeks or months)

Each exchange has its own procedures, and some are easier to work with than others. Major U.S. exchanges like Coinbase and Kraken have established protocols for deceased account holders. Offshore or decentralized exchanges may not.

What If the Private Keys Are Lost?

This is the worst-case scenario, and it is more common than people think. If the deceased held crypto in a personal wallet and nobody can locate the private keys or seed phrases, those assets are permanently inaccessible. There is no reset mechanism on the blockchain. No court order can recover them.

This is why estate planning for crypto owners is so critical. The best time to solve this problem is before it happens, not after.

How Should Crypto Owners Plan Ahead?

If you own cryptocurrency, your estate plan needs to specifically address it:

• Create a digital asset inventory. Document every crypto holding, including the type of asset, the wallet or exchange where it is stored, the approximate value, and how to access it.
• Store access credentials securely. Private keys and seed phrases should be stored in a secure location that your executor or trustee can access, such as a fireproof safe, a secure digital vault, or with your estate planning attorney. Never include private keys in a will, because wills become public documents during probate.
• Name a technically competent executor or trustee. Managing crypto requires technical knowledge. If your executor is not comfortable with digital assets, consider appointing a co-executor or advisor who is.
• Use a revocable living trust. Crypto held in a trust avoids probate entirely, which keeps the details of your holdings private and allows your successor trustee to act immediately.
• Update regularly. Crypto portfolios change frequently. Your inventory should be reviewed and updated at least annually.

How We Help Families With Digital Asset Planning

At Your Legacy Legal Care®, our estate planning attorneys work with crypto owners and their families to build plans that account for digital assets alongside traditional wealth. We help you create secure access protocols, name the right fiduciaries, and structure your plan so your digital assets are protected and accessible when your family needs them.

If you own cryptocurrency and your estate plan does not address it, schedule a strategy session with our team. The cost of planning is a fraction of what your family could lose if your keys disappear with you.

Key Takeaways:

• Cryptocurrency is treated as property under both federal tax law and Texas probate law. It must be inventoried, valued, and distributed like any other estate asset.
• Private keys are the single point of failure. Without them, crypto held in personal wallets is permanently inaccessible.
• Executors must secure crypto assets immediately, determine date-of-death values, and file required tax returns.
• Centralized exchanges have bereavement protocols, but the process can be slow. Decentralized wallets offer no such support.
• Crypto owners should create a digital asset inventory, store credentials securely (outside of the will), and name a technically competent fiduciary.

Related Resources from Your Legacy Legal Care®

• Planning for Your Digital Legacy in Estate Plans
• Protecting Your Virtual Assets in Estate Planning
• Estate Planning
• Probate Services
• Trusts
• Estate Planning Assessment (Free)