Imagine sitting at your kitchen table in Amityville or Garden City with a hardware wallet, a laptop, and a trust document that clearly lists “cryptocurrency holdings” as a major asset. The trust names you as trustee, yet every time you try to log in or unlock the device, you hit a wall. The language on paper says you control the asset, but in reality, no one can move a single coin.
This is the kind of quiet crisis more Long Island families are facing as digital assets collide with traditional trust administration. The documents look complete, the trustees are doing their best, but key technical steps were skipped when the trust was created. High-value crypto, online trading accounts, and cloud-based business assets end up stuck, disputed, or effectively erased, even though the trust was supposed to prevent exactly that outcome.
At Blumberg, Cherkoss, Fitz Gibbons, Blumberg, we have spent decades guiding Nassau and Suffolk County families through complex trusts and estates. In recent years, we have seen digital asset problems turn otherwise well-structured Long Island trusts into minefields. In this article, we walk through how these failures actually happen, why they are no longer rare, and what trustees and families can do to protect digital wealth before and after something goes wrong.
Contact our trust litigation lawyer in Long Island at (631) 449-7699 to schedule a free consultation.
Why Digital Assets Break Traditional Long Island Trusts
Most Long Island trusts are designed around a simple assumption. If the trust names an asset and grants a trustee authority, a bank, broker, or transfer agent will recognize that authority and cooperate. That model works reasonably well for checking accounts, traditional brokerage accounts, and real property. Digital assets, however, operate on a different control system that does not always respond to what the trust says.
Digital assets include much more than Bitcoin and other cryptocurrencies. We regularly see online-only bank accounts, app-based brokerage accounts, payment platforms, cloud-based business systems, and digital intellectual property that can be more valuable than a brick-and-mortar business. Each of these lives behind layers of usernames, passwords, and security protocols. Legal ownership might sit with the trust, but technical control lives with whoever actually holds the credentials and passes the platform’s security checks.
That disconnect is where many Long Island digital asset trusts fail. A trust may say, in broad terms, that all “digital assets” are part of the trust and under the trustee’s control. Yet the crypto wallet is still registered to the grantor as an individual, the email account tied to two-factor authentication is locked, or the cloud service will not speak to anyone without device-based verification. In those situations, what is written in the trust does not translate into real-world access, and a trustee can find themselves legally responsible for assets they cannot reach.
From our work with high-value estates across Nassau and Suffolk counties, we know that most families do not deliberately ignore digital assets. They simply assume that once the trust mentions them, the problem is solved. The reality is more demanding. Legal documents must be coordinated with how platforms, blockchains, and security systems actually work, or you end up with a technically inaccessible asset that exists on paper but not in the hands of the beneficiaries.
Missing Private Keys Turn Digital Assets Into Legal Ghosts
When it comes to cryptocurrency in particular, private keys and seed phrases are the real assets. The coins or tokens live on a blockchain, and whoever controls the private key controls the asset. Seed phrases, typically 12 to 24 random words, are used to recover a wallet if a device is lost or damaged. If both are gone, there is usually no recovery mechanism, regardless of what any will or trust says.
We often see Long Island trusts that list “Bitcoin wallet” or “Ethereum holdings” in a schedule of assets, but the plan never addresses where the private keys or seed phrases live, who knows about them, or how they will be handed to the trustee. The grantor may have stored a hardware wallet in a home safe and written the seed phrase in a notebook somewhere else in the house, confident that “the family will find it.” After death or incapacity, the trustee searches, but a few missing words or a misplaced sheet of paper make the entire position worthless.
This is not a paperwork problem that a Surrogate’s Court in Nassau or Suffolk County can fix. A court can confirm the trustee’s legal authority, but it cannot recreate a destroyed or lost seed phrase. The blockchain does not respond to court orders or letters of trusteeship. Once the technical key is gone, the coins remain on the chain but are effectively ghosts in the estate. Everyone knows they once existed, but no one can prove it definitively or move them.
From a liability standpoint, a trustee may be blamed if beneficiaries believe the trustee mishandled or failed to secure these keys. Without a deliberate key transfer process built into the trust planning, however, the trustee is starting at a disadvantage. In our trusts and estates and tax planning work, we focus heavily on this handoff. That can include documented key storage protocols, use of institutional custodians for significant positions, and clear instructions that ensure the technical control of the crypto aligns with the legal structure of the trust.
Authentication Roadblocks Stop Trustees in Their Tracks
Even when private keys are not involved, digital assets frequently sit behind layers of multi-factor authentication. Online brokerage accounts, app-based bank accounts, payment platforms, and cloud-based business tools often require a username and password plus a one-time code sent to a mobile phone, an authenticator app, or a hardware token. These measures protect against fraud during life, but they can block even a duly appointed trustee after death or incapacity.
A common pattern in Long Island estates involves accounts where the grantor handled everything from a personal smartphone. The trustee arrives with trust documents, a death certificate, and, if applicable, letters from the Surrogate’s Court, but the platform still sends every verification code to a deactivated phone number or an email account no one can open. Even when the platform has a procedure for working with fiduciaries, that process can be slow, documentation-heavy, and unforgiving if the trustee cannot satisfy every security check.
Custodial platforms, such as major crypto exchanges or online brokerages, add another layer of complexity. They typically treat the person named on the account as the only true customer and may not recognize a trust that was never reflected in the account titling. In those cases, the trustee must first convince the platform to accept their authority, then work through internal fraud and compliance teams that operate under federal regulations, not state trust law. Trustees often discover that what seemed like a routine account is almost frozen in practice.
Non-custodial arrangements create different problems. A non-custodial wallet controlled solely by a private key does not have a customer service department to call if two-factor authentication fails. If a grantor used an authenticator app on a phone that no one can unlock, the recovery path may depend entirely on whether backup codes were saved and shared in a way the trustee can access. In our planning and review work for Long Island clients, we focus on aligning these technical realities with the trust structure and making sure trustees have a clear, lawful, and workable path to authenticate themselves when it matters.
How Poor Chain Of Custody Invites Digital Asset Litigation
Even when digital assets are technically accessible, disputes often arise over who controlled them and whether that control was used properly. In the digital world, chain of custody means more than who held a physical object. It involves tracking who knew what passwords, who maintained which devices, when credentials were changed, and how transfers were authorized or documented.
Consider a Suffolk County family where one adult child handled all of a parent’s online accounts for years before a trust took effect. That child might know all the passwords, manage online business systems, or trade crypto on the parents’ behalf. After the parents’ death, the trustee and other beneficiaries discover that significant digital assets were moved shortly before or after death, but there are no clear records explaining who initiated those transfers or why. Without a documented chain of custody, suspicion grows quickly.
Beneficiaries on Long Island are increasingly willing to challenge trustees and other fiduciaries when digital assets are involved. They may allege that a trustee failed to identify or secure accounts, allowed someone else to siphon off value, or personally exploited access to benefit themselves. Digital logs, email histories, and device records can sometimes clarify what happened. Just as often, poor documentation leaves the trustee defending decisions based on memory and scattered notes, which rarely satisfy skeptical heirs.
Our firm’s long-standing presence in Nassau and Suffolk County has shown us how these disputes evolve in the Surrogate’s Courts. Trustees who cannot show how they searched for digital assets, what they did to secure credentials, and how they documented decisions around transfers or liquidations are more vulnerable to surcharge and removal actions. We help clients build better documentation practices into their administration workflows, then use our multi-partner structure to defend or bring claims when chain-of-custody problems turn into active litigation.
Common Digital Asset Planning Mistakes In Long Island Trusts
Most digital asset trust failures start years earlier with planning choices that looked harmless at the time. One common mistake is relying on broad, generic language. A trust might assign “all digital assets” to the trust and name a trustee without ever updating actual account registrations or confirming how each platform treats fiduciary access. The family believes the plan is complete, but the accounts still sit in individual names with no technical path for a trustee to step in.
Another recurring problem is informal credential management. We regularly encounter situations where passwords and keys are stored on a home computer with no backup, in a desk drawer, or in a password manager that no one else can unlock. Families tell us there is a “list somewhere,” but it is outdated or incomplete. In some Nassau County estates, the only person who knew the full login process, including two-factor steps, is the person who created the trust and is now gone or incapacitated.
Trusts also fail when grantors assume that a tech-savvy relative will simply “figure it out.” Relying on an unofficial family IT person leaves trustees sidelined and creates fertile ground for accusations later. If that relative moves assets without clear authority or leaves gaps in documentation, beneficiaries may argue that the trustee allowed an unauthorized person to control trust property. Surrogate’s Court judges tend to look unfavorably on arrangements where legal authority and actual control do not match.
Because we have spent decades working with Long Island families, we see these patterns repeat, especially in high-value estates that adopted new technologies before their estate plans caught up. During reviews, we focus on identifying these weak points and translating vague references to “digital assets” into specific, actionable steps tied to particular platforms, devices, and custody arrangements.
Designing Digital Asset Trusts That Actually Work
Effective digital asset trust planning starts with recognizing that legal language alone cannot unlock an account or reconstruct a private key. The trust must be designed around how each category of digital asset is actually held, accessed, and transferred. For significant cryptocurrency positions, that often means deciding whether to use institutional custodians who can recognize a trust as account owner, rather than relying entirely on non-custodial wallets controlled by a single individual.
For any digital asset, we encourage clients to maintain a living digital asset inventory. This is not just a list of platforms. It should include where accounts are held, how they are titled, what form of authentication they use, and how a trustee can initiate contact or recovery. That inventory should be reviewed periodically, particularly when new exchange accounts, DeFi platforms, or cloud-based business tools enter the picture. A trust drafted several years ago may not contemplate a new asset class that now represents a substantial share of family wealth.
Credential and key management must also be deliberate. Some clients choose to store backups of keys, passwords, and recovery codes in secure, offline locations that trustees can access under defined conditions. Others use professional solutions designed for fiduciary access, which can balance security with the need for continuity. Whatever approach is used, it should align with the trust’s terms and be documented clearly enough that a successor trustee in Nassau or Suffolk County can follow the plan even without personal familiarity with the decedent.
These decisions intersect with tax planning and business succession as well. Selling digital assets quickly to reduce volatility may have tax consequences. Leaving them in place and transferring control may implicate different reporting and compliance obligations. Because our firm focuses on the intersection of trusts, estates, and tax planning for high-value clients, we look at digital asset planning through all of these lenses. Our goal is to create plans that hold up in Long Island Surrogate’s Courts and in the real world of logins, devices, and evolving platforms.
When Digital Asset Trusts Fail, Trustees Face Real Liability
Trustees in New York have a duty to identify, safeguard, and administer all trust assets with prudence. That duty applies to a checking account at a local bank and to a crypto wallet accessed through an app. When digital assets disappear, become inaccessible, or are mishandled, beneficiaries can and often do argue that the trustee failed to meet that duty. The fact that the failure involved new technology does not, by itself, excuse inaction.
On Long Island, trustees come under scrutiny when they do not make reasonable efforts to discover digital assets, do not act promptly when they learn about them, or do not document their attempts to secure access. If a large online trading account is discovered months into an administration and the trustee cannot show earlier search efforts, beneficiaries may question whether that delay cost them value. If a hardware wallet was found but then lost or damaged, the trustee’s handling of that device will be examined closely.
When a digital asset trust failure is already underway, trustees still have options. They can work with counsel to pursue platform-based recovery procedures, enlist appropriate technical support to search for keys and credentials, and engage with beneficiaries transparently about what is being done. In some cases, the best course is to seek guidance or approval from the Surrogate’s Court before taking certain steps. In others, negotiation among beneficiaries can resolve disputes without full litigation, especially when the underlying technical facts make complete recovery unlikely.
Our firm brings a deep bench to these situations, combining trusts and estates knowledge with civil litigation experience. We advise trustees on how to document their actions, how to communicate with beneficiaries, and when to seek court involvement. We also represent beneficiaries who suspect that digital assets were mishandled or ignored. In every matter, we focus on candid assessments of risk and available remedies rather than promises no one can keep about recovering every lost coin or login.
How We Help Long Island Families Protect Digital Wealth
Digital asset trust failures are not flukes. They are predictable outcomes whenever carefully drafted Long Island trusts are bolted onto digital systems that were never designed with trustees in mind. Missing private keys, locked authentication methods, and undocumented access histories turn real value into legal and technical puzzles. Trustees bear the brunt of those failures, and families watch wealth evaporate that could have been preserved with better alignment between planning and technology.
At Blumberg, Cherkoss, Fitz Gibbons, Blumberg, we work with individuals, families, and businesses across Nassau and Suffolk counties to close that gap. We review existing trusts for digital asset vulnerabilities, help design new structures that reflect how modern platforms actually work, and represent trustees and beneficiaries when disputes arise. Our firm’s roots in Long Island go back to 1935, and our multi-partner team brings the institutional continuity and interdisciplinary support these complex matters demand. If you hold significant digital assets or are responsible for administering a trust that includes them, a focused review today can spare your family or your fiduciary record from much harder problems later.
Contact us at (631) 449-7699 to start your path toward a secure, confident, and positive resolution for everyone involved.