Non-fungible tokens, or NFTs, have transformed how people buy, sell and own digital assets. Whether it’s art, music, videos, or virtual real estate, NFTs are becoming part of many investors’ portfolios. For those who’ve purchased or created NFTs, planning for their future ownership is just as important as traditional estate planning for real estate, bank accounts, or retirement funds.
However, unlike physical assets, NFTs reside on the blockchain, making them more challenging to access, value, or transfer without proper planning and consideration. If you own NFTs and want them to pass to your loved ones or a charitable cause, you must ensure that your estate plan addresses their unique legal and technical requirements.
NFTs are digital tokens stored on a blockchain that prove ownership of a unique item. They are not interchangeable like cryptocurrencies or stocks. Each NFT is distinct and may carry value due to its rarity, creator, or market demand.
However, unlike a painting on your wall, an NFT cannot be found in a drawer or bank vault. Private keys, passwords and digital wallets control access. If heirs or estate executors don’t know where these credentials are stored—or how to use them—those assets may be lost forever.
Furthermore, the value of NFTs can be volatile and complex to appraise. The IRS treats NFTs as property, meaning any transfer can trigger taxes. Understanding how to manage and transfer NFTs within your estate requires attention to both legal and technical details.
The first step is to create a clear digital inventory. This should include a list of all NFTs owned, the platforms where they’re stored (such as OpenSea or MetaMask) and instructions for accessing the associated wallets or hardware devices. Without this information, executors may not even be aware that the assets exist.
The next step is to include language in your will or trust that specifically addresses digital assets. A generic clause may not be sufficient to grant access or outline your intentions for your NFTs. Naming a digital executor—someone familiar with blockchain technology—can also help ensure the smooth transfer of your assets.
A trust may be beneficial for NFT owners. It allows the creator of the estate plan to maintain privacy, avoid probate and provide clear instructions for managing the NFTs. Trusts can also minimize taxes and ensure the ongoing management of assets that may appreciate over time.
It is also necessary to ensure compliance with the relevant platform's terms of service. Some accounts are non-transferable and may expire upon the account holder's death. Consulting with an attorney familiar with digital assets can help clarify your actual rights—and how to pass them on legally.
Keeping NFTs secure requires striking a balance between privacy and accessibility. Store private keys, passwords and recovery phrases in a secure yet accessible manner. Options include encrypted USB drives, password managers, or offline paper backups stored in a safe location.
It’s important to share this access plan with a trusted individual or include it as part of your estate plan documentation. If your executor or heirs cannot access your digital wallet, they may permanently lose the NFTs, regardless of what your will states.
Security should also extend beyond physical access. Be cautious of phishing emails, fake marketplaces and other common scams that can compromise your digital wallet. A small mistake can result in the loss of valuable digital property.
Estate planning has always been about preserving wealth and passing it down according to your wishes. As digital assets like NFTs become more common, planning for their future becomes just as essential as preparing for traditional property.
Whether you’re a digital art collector, a creator, or simply exploring blockchain investments, make sure your NFTs aren’t left out of your legacy. With the right legal and technical planning, these unique assets can be secured and passed on to the next generation.
Legacy One Law Firm, APLC is an estate planning and probate administration law firm in Los Angeles, California, serving families throughout the State. Schedule a quick and easy consultation with our estate planning attorney, Sedric E. Collins, Esq., or call 323-900-5450.
