Ripples in estate planning: executive orders change digital asset outlook
On the 23rd January 2025 President Trump signed an executive order marking a complete turnaround to the way the United States government will approach digital asset markets and regulation. Whilst the order does not address estate planning directly, nor does it apply directly outside the United States, moving forward, the order will have a major impact on what a all practitioner must consider, whatever jurisdiction they practice in.
The order changes the U.S. governments approach from a cautious research-focused approach to one where rapid innovation is encouraged with guarantees on an individual’s rights to engage with blockchain products and services. This is likely to lead to an extraordinary growth in digital assets and associated services worldwide. This growth will in turn impart increased legitimacy on the entire digital assets market, the consequence for the practitioner being an increase in clients that hold digital assets.
One critical aspect from the estate practitioner’s perspective is the guarantee for the individual to hold digital assets in a self-custody arrangement, for most digital assets there is no central registry or authority that can be queried to determine if an individual held particular assets.
Practitioners should ensure that the estate planning questionnaire covers digital assets in detail and whenever there is a hint of the existence of a digital asset further questioning and research should be undertaken.
To that end, practitioners should have a clear understanding of what self-custody means in the digital world. A digital asset resides in cyberspace, however there needs to be a tether or representation in the physical world to access the asset. This is achieved using a combination of public and private keys, a “wallet” is where you store your private keys.
For example, when you buy a Bitcoin you are issued with a public key and a private key. Using an algorithm, the private key generates the public key. The public key is available for anyone to see on the blockchain. Think of the public key as the BSB and account number for your bank account. The private key is like the PIN or password on your account, it allows you to access the funds in the account.
However, and this is the critical part, for estate planning, there is no bank or central authority to reissue the private key (PIN/password) should it be lost. This is a decentralised system – lose the private key and access to the funds or asset is lost for all time.
Wallets can be either custodial or non-custodial.
A custodial wallet is where the private keys are held by a trusted third party. Some of the major providers are Coinbase, Gemini, BitMex, BitGo, Binance. There is a bankruptcy risk for custodially held cryptoassets — upon bankruptcy the assets vest in the Trustee and your client may lose all their holdings.
A non-custodial wallet is where the private keys are held directly by the owner and they have full control over the cryptoasset. Some of the more popular non-custodial wallet providers are Best Wallet, Zengo, Exodus, Ellipal.
Of the two wallets, it is the non-custodial wallet that will present the most challenges to the practitioner. The estate plan must contain clear instructions on how the administrator of the estate can access the private keys. Additionally, you should explain to your client the risks associated with providing the private keys to a third party.
Non-custodial wallets can be broken down into two further categories:
• Cold wallets, this is a physical piece of hardware like a USB stick, a piece of paper with the key printed, it is offline and therefore cannot be hacked but it can be lost or stolen.
• Hot wallets are connected directly to the internet all the time, they are typically part of an exchange account. They are not as secure digitally as they are subject to hacking and theft of contents.
Emphasis should also be placed on how the client (or administrator) will recover the private keys should they be lost. Storage in a flood-proof and fire-proof location is a common solution, additionally clients should keep multiple secure copies in both analog and digital format.