Bitcoin inheritance planning

Self-custody removes the customer service desk that would normally handle a death, so the plan has to exist before it is needed. In England and Wales, and in most US states, a probated will becomes a public record, which is why a recovery phrase must never be written into one. Plan for a reader who is grieving, not technical.

How it works

A workable inheritance plan answers four questions, and only the third is about cryptography. Does the person know the coins exist? Can they find the backup? Can they use it? Are they legally entitled to it? Almost every failure happens on the first two, in families where nobody knew there was anything to look for.

Keep the legal layer and the secret layer apart. Your will names who inherits and appoints an executor, and it stays free of anything sensitive. A sealed letter of instruction, held with the will or by the same lawyer, says what exists, which software reads it, where each backup physically sits, and who to call for help. The secrets live only in the places the letter describes.

The access mechanism can be as plain or as clever as you can maintain. A sealed metal plate with a solicitor, plus the letter, beats most of what people actually have. A two-of-three quorum with one key held by a relative gives the estate a route without handing anyone unilateral control while you are alive. A timelocked path uses the chain itself: OP_CHECKLOCKTIMEVERIFY, added by BIP-65 and enforced since block 388,381 in December 2015, makes a recovery key worthless until a chosen date that you push forward every time you touch the wallet. Stop pushing, and the key ripens on its own.

Legal authority is the part technical people skip. Most US states have adopted a version of the Revised Uniform Fiduciary Access to Digital Assets Act, which gives a named fiduciary standing over digital property. For coins still on an exchange, that standing opens the platform's bereavement process, which wants a death certificate and a grant of probate.

Where you see it

The cautionary tale for bitcoin estates usually arrives as a company rather than a person. Gerald Cotten, sole operator of the Canadian exchange QuadrigaCX, died in December 2018, and roughly 76,000 clients found that the platform's keys had died with him. It was a custodial collapse, not an estate failure, and it generalizes: one head holding one secret has an expiry date nobody chooses.

Passphrases are where careful people fail their families. An heir holding the words but not the extra passphrase restores an empty wallet, gets no error message, and concludes there was never any bitcoin. If you use one, the letter must say it exists, even where it does not say what it is.

Rehearse instead of describing. Hand your heir the letter, put a small amount into a fresh wallet, and watch in silence while they try to recover it. Whatever they get stuck on is the broken part. Revisit it whenever you change devices, add a passphrase, or move a backup, because a plan pointing at an abandoned wallet sends someone to an empty box and convinces them the story ends there.

In the United States, inherited property takes a new cost basis equal to its value on the date of death, so an heir who sells soon afterward can owe far less tax than you would have.

Bitcoin inheritance planning vs Shamir backup

Shamir sharing splits one secret into pieces; inheritance planning is the whole problem, of which splitting a secret solves at most one part. Handing three relatives a share each feels decisive and answers only the question of access. It does not tell anyone the coins exist, does not record which software reassembles the shares, does not survive a relative moving house quietly, and gives nobody standing with a probate court. Use threshold sharing inside a plan that also has a letter, an executor, and a rehearsal.