Cryptocurrency and Digital Assets: The Estate Planning Gap

Of everything that can go wrong in an estate, cryptocurrency has a distinction: it’s the one asset class where a small oversight results in permanent, total, irreversible loss.

There’s no bank to call. No branch manager who can verify your identity. No court order that can compel a company to release the funds. If the private keys are gone, the asset is gone — visible on the blockchain, permanently inaccessible, forever.

Estimates suggest a significant share of all Bitcoin in existence is already permanently lost. A meaningful portion of that is thought to be the result of deaths where nobody could access the keys.

Why Crypto Is Different

There’s no institution behind it. Traditional assets have custodians — a bank, a broker, a registrar. Someone holds a record, and a court can compel them to act. Self-custodied cryptocurrency has no such party.

Access is the asset. Ownership is defined entirely by control of the private key or seed phrase. Whoever holds it, owns it. If nobody holds it, nobody does.

It doesn’t appear on statements. There’s no monthly mailing, no T5 slip generated automatically, no letterhead arriving in the mail to alert an executor that the asset exists.

Executors often don’t know to look. Many people never discuss their holdings with family. If nobody knows the crypto existed, nobody searches for it.

It’s taxed like property. The CRA treats cryptocurrency as a commodity, not currency. Death triggers a deemed disposition at fair market value — which means the estate can owe real tax on an asset the executor may not even be able to access.

The Two Kinds of Holdings

Custodial — held on an exchange like Coinbase, Kraken, Newton, Bitbuy, or Shakepay. The exchange holds the keys. These behave more like conventional financial accounts: exchanges have estate processes and will generally release assets to a properly documented executor with a death certificate and a representation grant.

Self-custodied — held in a personal wallet where the individual controls the keys. A hardware device (Ledger, Trezor), a software wallet, or a seed phrase written on paper or stamped into metal. This is where assets are lost permanently.

The distinction matters enormously for executors. Custodial holdings are recoverable through process. Self-custodied holdings are recoverable only if you find the keys.

For Executors: How to Search

Look for exchange evidence. Bank statements showing transfers to or from exchanges are the clearest signal. Search email for names of major exchanges, and for terms like “wallet,” “seed phrase,” “recovery phrase,” “Bitcoin,” “Ethereum,” and “2FA.”

Check devices. Crypto apps on a phone or tablet. Browser extensions like MetaMask. Bookmarked exchange login pages.

Look for hardware wallets. A Ledger or Trezor looks like a USB drive. Check desks, safes, safety deposit boxes, and drawers. Finding one without the PIN and recovery phrase is of limited use — the recovery phrase is what actually matters.

Look for a written seed phrase. Typically twelve or twenty-four words, written on paper, on a card that came with a hardware wallet, or stamped into a metal plate. People hide these — in books, safes, filing cabinets, sometimes taped inside furniture. If you find a list of random words, do not discard it.

Check the tax returns. Someone who reported crypto gains has holdings. Schedule 3 capital gains entries or accountant correspondence may reveal them.

Check the password manager. Exchange logins and sometimes seed phrases are stored there.

Ask. A spouse, adult child, or close friend may know the person was involved in crypto even if they don’t know the details.

What to Do When You Find Something

Secure it immediately. A recovery phrase is a bearer instrument — anyone who has it can take the funds. Treat it exactly as you would cash. Don’t photograph it, don’t email it, don’t store it in cloud storage.

Don’t transfer anything prematurely. Moving crypto is a taxable event and irreversible. Get advice before touching it.

Value it as of the date of death. You’ll need a fair market value in Canadian dollars at the date of death for the deemed disposition on the final return. Document your source and methodology.

Get an accountant who understands crypto. The tax treatment is not intuitive, and mistakes are expensive. This is not a DIY area.

For exchange accounts, follow the formal process. Canadian exchanges generally require a death certificate and a representation grant. Contact their support team and ask specifically for their estate process.

Beyond Crypto: Other Digital Assets With Real Value

Cryptocurrency gets the attention, but executors should also consider:

• Domain names — some are genuinely valuable and renew automatically until the card fails

• Monetised channels and accounts — YouTube, Substack, Patreon, podcast networks

• Online businesses — e-commerce stores, app revenue, affiliate income

• Intellectual property in digital form — manuscripts, music, photography, code

• Loyalty points and travel rewards — often transferable to an estate or spouse; frequently forgotten

• Digital game and platform assets — occasionally valuable, usually non-transferable under terms of service

Planning Ahead: What Actually Works

If you hold cryptocurrency, this section is the important one.

Tell someone it exists. This alone prevents the most common failure. Your executor cannot recover what they don’t know about.

Write instructions — separately from your will. A will can become a public document through probate. Never put a seed phrase or private key in it. Instead, write a separate confidential document explaining what you hold, where it is, and how to access it. Reference its existence in your will.

Store the instructions securely. A safety deposit box, a fireproof safe your executor can access, or a password manager with emergency access configured. Some people split a seed phrase across two secure locations.

Consider a multi-signature arrangement. For substantial holdings, a multi-sig wallet requiring multiple keys can allow a trusted person to participate in recovery without giving them unilateral control during your lifetime.

Write instructions for a non-technical reader. Assume your executor has never used a hardware wallet. Explain what the device is, what the phrase does, and what steps to take — in plain language.

Name an executor who can handle it, or authorise them to hire someone. If your executor isn’t technical, say so in your will and authorise them to retain specialist assistance at the estate’s expense.

Review as your holdings change. Instructions written three exchanges ago are no help.

A Note on Scams

Executors dealing with crypto are targeted. Be alert to:

• “Recovery services” claiming they can restore lost wallets for a fee — legitimate recovery of a lost seed phrase is not possible

• Anyone asking you to enter a seed phrase into a website or send it to them

• Unsolicited contact from people claiming to hold the deceased’s assets

Never share a seed phrase with anyone. There is no legitimate circumstance in which a support representative needs it.

The Broader Digital Estate

Crypto sits within a wider category of digital assets — email, photo libraries, social media, cloud storage. We cover the rest in our guide to what happens to your online accounts when you die.

Where We Come In

At Alternatives Funeral & Cremation Services, we provide the certified death certificates that exchanges, financial institutions, and platforms require before they’ll engage with an executor.

And when families come to us for preplanning, we encourage them to think beyond the funeral — because the wishes that are written down and shared are the ones that get honoured. That applies to a digital estate as much as anything else.

Learn more at myalternatives.ca

This article provides general information about digital assets in Canada. Tax treatment and platform policies change. For advice about a specific estate, consult a qualified estate lawyer and an accountant with cryptocurrency experience.