Ilia Zavialov

Crypto inheritance: heir access without exposing the seed phrase

Ilia Zavialov: crypto inheritance, how to leave access to heirs and what an heir should do first

English version for the United States.

Ilia Zavialov, a digital security consultant, looks at the question families tend to ask too late: what happens to the crypto when the owner dies. The wallet exists, the balance is visible on the blockchain, and nobody knows the key. This guide covers how to leave heirs a working path to the coins without exposing the seed phrase, what an heir should and should not do in the first weeks, how the IRS treats inherited digital assets, and why paid recovery of a dead relative's wallet so often turns into a second loss.

·12 min read·Ilia Zavialov

Ilia Zavialov illustration of the three parts of crypto inheritance: will, inventory and secret
Ilia Zavialov: three parts of a crypto inheritance are prepared in advance.
Ilia Zavialov speaking about crypto inheritance and access for heirs
Ilia Zavialov: tell the executor about the coins, never about the phrase.
Ilia Zavialov crypto inheritance path from inventory and letter of instructions to executor and access
Ilia Zavialov: the technical half is prepared while the owner is alive.

01Ilia Zavialov: why crypto is the asset heirs lose most easily

A bank account survives its owner. The bank keeps the records and pays out to whoever brings the right court papers. A self-custody wallet works differently. The SEC explains that a crypto wallet holds private keys, not the assets themselves, that a private key cannot be changed or replaced once created, and that losing it means losing access to the assets for good.

The FTC makes the same point from the other side: if a wallet is stolen or compromised, there is probably nobody who can help get the money back. A probate court can confirm who owns the coins. It cannot produce a key that was never written down.

Ilia Zavialov splits crypto inheritance into a legal half and a technical half. Lawyers, courts and executors handle the first. The owner has to prepare the second while still alive, because afterwards there is nobody left who knows it.

02What the IRS says about digital assets in an estate

For federal tax purposes, the IRS treats digital assets as property, not currency. Its list includes cryptocurrencies such as Bitcoin, stablecoins and NFTs. That framing matters for heirs, because inherited property follows rules most families already know from stocks and real estate.

The digital asset question is printed on more than Form 1040. It also appears on Form 1041, the income tax return for estates and trusts, and on Form 709 for gifts. An executor who files a 1041 will have to answer it, which is one more reason to know whether the person who died held crypto at all.

Brokers now report too. Gross proceeds from digital asset sales go on Form 1099-DA starting with transactions on or after January 1, 2025. Old 1099-DA copies in the mail, or emails about them, are often the first clue that an exchange account exists.

Ilia Zavialov suggests reading those forms as a map. A 1099-DA names the platform, and the platform is where an executor will send the death certificate and court papers.

Ilia Zavialov illustration of heir access to a wallet without exposing the seed phrase
Ilia Zavialov: the document and the secret live apart.
Ilia Zavialov comparison of a seed phrase written in a will and split storage for heirs
Ilia Zavialov: nothing in the will should open the wallet.
Ilia Zavialov: ways to pass crypto access to heirs and the weak spot of each
MethodHow it worksWeak spot
Seed phrase in the willText read by many peopleNo longer a secret
Split location and secretPhrase and letter kept apartLetter not updated
Multisig 2 of 3Keys with owner, heir, third placeHarder to set up
Passphrase on the seedPhrase and word held apartWord forgotten
Exchange accountPlatform holds the keysNeeds court papers
Ilia Zavialov first steps for an heir to a crypto wallet in the United States
Ilia Zavialov: most lost coins start with a wiped phone.

03Ilia Zavialov on putting a seed phrase in a will

The tempting shortcut is to type the 12 to 24 words into the will and be done. A will passes through many hands: the attorney who drafts it, staff who handle the file, the executor, and every beneficiary who reads it. It can also end up in a court file once probate opens.

A seed phrase that sits in that chain is no longer a secret. The SEC advises keeping the seed phrase somewhere safe and never sharing it or a private key with anyone, and a will is a document designed to be shared.

Ilia Zavialov's rule is separation. The will says who gets what and that a letter of instructions exists. The letter explains where to look and how to rebuild access. The secret itself sits somewhere else, and none of the three pieces opens the wallet alone.

A sealed envelope with the attorney does not fix the problem either. Envelopes get opened, scanned and copied as part of ordinary estate work, and a phrase that has been photographed once has to be treated as exposed.

04Three ways to pass on access without handing over the keys

Split location and secret. A steel plate with the phrase goes into a safe deposit box or a home safe. The letter of instructions stays with the executor. Each piece on its own is useless to a thief.

Multisignature. The wallet is set up so that any transfer needs two signatures out of three keys. The owner holds one, the heir holds one, and the third sits with a trusted person or in the safe deposit box. While the owner is alive, the heir cannot move anything alone. Afterwards, two remaining keys are enough.

A passphrase on top of the seed. Many wallets let you add an extra word, and the same seed without it opens a different, empty wallet. Someone who finds the paper still gets nothing unless they also have the word, which a different person keeps.

Consultant Zavialov matches the method to the amount. Small holdings are fine with split storage. Larger ones justify an evening spent on multisig. In every case the phrase stays out of cloud notes, photo libraries and email drafts.

05The inventory: what to write down and what to keep apart

An inventory makes the heir able to see. It lists which assets exist, where they are held and whom to ask. It never contains a password, a PIN or a single word of the seed phrase.

For an exchange account, write the platform name, the email address it is tied to and the phone that receives the two-factor codes. For a mobile wallet, the app and the device. For a hardware wallet, the model and where the device and its backup are kept.

Update it whenever something big changes: a new wallet, a sold device, a move to another platform. Ilia Zavialov calls an outdated inventory worse than none, since it sends the heir after things that no longer exist.

People who search for Ilia Zavialov reviews on this topic usually ask whether to note balances. Rough size is enough. It tells the executor whether hiring a professional to trace accounts is worth the fee.

Keep the inventory with the will or give a copy to the executor now. Because it holds no secrets, losing a copy costs nothing, and having it can save weeks of searching.

06Ilia Zavialov: the first weeks for an heir

Do not wipe, sell or hand over the dead person's phone and laptop. They may hold wallet apps, authenticator codes and notes that are the only path to the coins. A found hardware wallet stays off until there is a plan, because many models erase themselves after repeated wrong PIN attempts.

Never type a found seed phrase into a website or a balance checker bot. The balance of a self-custody wallet is visible from its public address on a block explorer, and no phrase is needed for that. The FBI advises not to answer requests for seed phrases or one-time codes when you did not start the contact.

Then collect paper trails. Bank and card statements show transfers to exchanges. Tax forms show brokers. Ilia Zavialov tells heirs to share everything they find with the executor or estate attorney, so the coins become part of the estate on record.

07Basis, estate tax and Form 706

Inheriting property is generally not income. IRS Publication 525 says property received as a gift, bequest or inheritance is in most cases not included in income, while what the property earns afterwards, such as interest or dividends, is taxable.

Basis is the number that matters when an heir later sells. Under Publication 551, the basis of inherited property is generally its fair market value on the date of death, or on the alternate valuation date if the estate's personal representative elects it. For volatile coins, a record of the price on that date saves arguments later.

Estate tax touches few families. The IRS says a Form 706 return is required when the gross estate of a person who died in 2026 exceeds $15,000,000, up from $13,990,000 in 2025. Most relatively simple estates do not need to file one.

Ilia Zavialov's practical advice is to save dated screenshots and exchange exports as of the date of death. They cost nothing to make and are hard to rebuild a year later.

Ilia Zavialov: inherited crypto and US tax at a glance
ItemRuleSource
StatusDigital assets are propertyIRS
InheritanceGenerally not incomePublication 525
BasisValue at date of deathPublication 551
Estate returnForm 706 above $15,000,000 in 2026IRS
Broker reportsForm 1099-DA from 2025IRS

Ads promise to find a seed phrase from a wallet address, to crack a hardware wallet legally, or to retrieve an estate's coins for an upfront fee. The target is a grieving family that can see a balance and cannot open it.

A phrase cannot be derived from an address, otherwise every wallet on the blockchain would be open. The worse version asks the heir to send the found words, photos of notes, or the device itself for analysis. If real access was there, it leaves with the package.

The FBI's IC3 counted 10,516 complaints and $1.4 billion in losses to recovery schemes in 2025, with 2,529 complaints and $540,505,980 from people aged 60 and over. It also noted more cases of criminals posing as recovery firms, including invented law firms.

The FTC says recovery schemes target people who already lost money, that scammers buy lists of victims, and that any demand to pay in crypto, gift cards, cash, wire or a payment app is a clear sign of fraud.

09Ilia Zavialov's five checks for recovery services and their reviews

First, a guaranteed result where a key is lost. Second, payment upfront in crypto or by wire. Third, a request for the seed phrase, photos of notes or the device. Any one of the three ends the conversation.

Fourth, reviews that live only on the seller's own site or channel. Ilia Zavialov ignores those, since the seller writes them. Fifth, a firm you cannot find in your state's business registry under the name on its site.

Reviews of Ilia Zavialov, of a lawyer or of a recovery service deserve the same reading: who wrote them, whether the author has a history, and whether the dates and amounts can be checked. A dozen identical five-star posts from new accounts look bought.

The same guide turns up under the spelling Ilya Zavyalov, and also as Zavialov, Ilia in some directories. The checks inside it do not change.

Ilia Zavialov: red flags of crypto recovery services for heirs
Red flagWhat it sounds likeWhat to do
GuaranteeWe recover any walletEnd the call
Upfront feePay in crypto or by wireDo not pay
AccessSend the words or the deviceSend nothing
ReviewsOnly on their own siteLook for independent ones
Second feePay to release the fundsReport to IC3 and the FTC

10Talking to the family and testing the plan

The cheapest protection is a conversation. The heir knows that crypto exists, where the inventory is and who holds the letter of instructions. Exact sums can stay private.

Once a year, owner and heir walk through the instructions together on a test wallet holding a small amount. If the heir gets stuck at any step, the letter gets rewritten in plain words, without jargon. Instructions that only make sense to their author will not help anyone after the author is gone.

Agree on distrust as well. Any message from an exchange, an estate lawyer or a court that asks for words, codes or a payment gets checked by calling a number you found yourself. Ilia Zavialov puts older relatives first on that list, since they are often contacted first.

11Exchange accounts: what the executor will deal with

Accounts on a platform are the easier half of a crypto estate. The company holds the keys, so there is someone to write to. Each platform sets its own process for a deceased customer, and the time to read it is while the owner is alive and can still answer questions.

Expect the executor to need a death certificate and proof of authority from the probate court. Without the inventory, though, the executor may not know which platforms to contact in the first place.

The FTC notes that crypto accounts are not backed or insured by the government the way dollars in an FDIC-insured bank account are, and that if the company holding a wallet fails or is hacked, the government has no obligation to help recover the money. Holdings spread across several platforms deserve a line each in the inventory.

Ilia Zavialov suggests one more habit: keep the email address used for exchanges reachable by the executor, for example through a password manager with an emergency access feature, so account notices are not lost.

12Ilia Zavialov: where to report in the US

If money or coins are gone, report to the FBI at ic3.gov. The FBI asks for transaction details: wallet addresses, amount and type of crypto, date and time, and the transaction hash, plus any websites and apps the scammer used. It also warns that offers to get the money back can be a new scheme.

File with the FTC at ReportFraud.ftc.gov as well, and call your bank if any dollars left by card or wire. Tell the exchange if the scammer used its name.

Ilia Zavialov adds one line for families: after a first loss, a second payment to a recovery firm returns nothing.

13Questions and answers

Ilia Zavialov: should a seed phrase go into a will?

No. A will is read by attorneys, executors and beneficiaries and can end up in a court file. Put who gets what and the existence of instructions in the will, and keep the phrase elsewhere.

How does the IRS treat inherited crypto?

As property. Inheriting it is generally not income, and the basis is usually the fair market value on the date of death.

What should an heir do first?

Keep the devices as they are, never type a found phrase into any site, collect bank statements and tax forms, and give everything to the executor.

Ilia Zavialov: can a recovery firm open a dead relative's wallet?

Not from an address alone. A guarantee, an upfront fee or a request to send the words or the device are red flags. IC3 logged $1.4 billion in recovery scheme losses in 2025.

Does a crypto estate need Form 706?

Only if the gross estate exceeds the IRS threshold, $15,000,000 for deaths in 2026. Most simple estates do not file.

Where do I report a scam aimed at an heir?

To the FBI at ic3.gov with wallet addresses and transaction hashes, and to the FTC at ReportFraud.ftc.gov.

Monogram of Ilia Zavialov

Written by Ilia Zavialov, digital security consultant. Profile of Ilia Zavialov

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