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What happens to your crypto when you die

2026-08-01 · Custody & Security A self-custodied position carries no beneficiary designation, and there is nobody holding it who can be asked to transfer it. If the key cannot be reconstructed, no court order recovers the asset, and every mechanism that fixes that problem charges you…

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2026-08-01 · Custody & Security

A self-custodied position carries no beneficiary designation, and there is nobody holding it who can be asked to transfer it. If the key cannot be reconstructed, no court order recovers the asset, and every mechanism that fixes that problem charges you something while you are still alive.

What the record shows

What a brokerage account has that a private key does not

The Uniform TOD Security Registration Act, enacted for example at Virginia Code §§ 64.2-612 to 64.2-617, lets a security be registered in “beneficiary form”. The statute defines a “registering entity” as “a person who originates or transfers a security title by registration, and includes a broker maintaining security accounts for customers and a transfer agent or other person acting for or as an issuer of securities” (§ 64.2-612). Under § 64.2-616, on proof of death and compliance with the registering entity’s own requirements, the security may be reregistered in the surviving beneficiary’s name. § 64.2-617(A) adds that a registering entity is not required to offer beneficiary-form registration at all.

Three components make that work: an entity that holds the registration, a record of who the owner is, and a process that accepts proof of death. A private key held by its owner has none of them.

What the fiduciary statute reaches, and what it leaves open

The Revised Uniform Fiduciary Access to Digital Assets Act (2015), drafted by the National Conference of Commissioners on Uniform State Laws and recommended for enactment in all the states, governs a fiduciary’s access to digital assets. It defines a “custodian” as “a person that carries, maintains, processes, receives, or stores a digital asset of a user” (§ 2(8)). Section 4 sets a three-tier priority: an online tool offered by the custodian overrides a contrary direction in a will, trust or power of attorney; absent an online tool, the estate documents govern; absent both, the terms of service apply.

Two provisions reach self-custody directly. Section 15(c) gives a fiduciary with authority over a decedent’s property “the right to access any digital asset in which the decedent … had a right or interest and that is not held by a custodian or subject to a terms-of-service agreement”. Section 15(e) gives a fiduciary with authority over tangible personal property “the right to access the property and any digital asset stored in it”. A hardware wallet in a drawer is within the act’s contemplation.

What those sections confer is authority. Whether the key can be reconstructed is a separate question the statute does not reach.

In a note published on 7 March 2019, three Perkins Coie lawyers, Wendy Moore, Christopher Sigmund and Susan von Herrmann, wrote that fiduciary access language “alone is insufficient protection for cryptocurrencies, which were not necessarily considered or sufficiently understood by drafters when RUFADAA and similar statutes were adopted”, and that owners “must employ more practical ways” of giving fiduciaries access.

A will admitted to probate can be bought

In England and Wales, the government’s own probate records service lets any member of the public search for a grant of representation and “order a copy of a probate record (including a will, if there is one)” for £16, online or by post on form PA1S. A £4 standing search asks to be sent a copy if a grant is issued in the next six months.

Jurisdictions differ and the position in any particular US state is a question for counsel admitted there. The mechanism is common enough that a seed phrase written into a will should be treated as a phrase a stranger can buy.

QuadrigaCX is the standard cautionary tale, and the record does not support it

Gerald Cotten, chief executive of QuadrigaCX, died on 9 December 2018. Ernst & Young Inc. was appointed monitor in the Canadian insolvency proceedings, and in its Third Report of 1 March 2019 it set out what the public blockchain showed about the six cold wallet addresses the company itself had identified. Aggregate month-end bitcoin balances from April 2014 to approximately April 2018 “ranged from a low of nil to a peak of approximately 2,776 bitcoin”, averaging approximately 124 bitcoin over the four-year period. In April 2018 the remaining bitcoin was transferred out and the balances went to nil.

That is eight months before Cotten died, and the four-year peak was a fraction of what clients were owed. A second keyholder at Quadriga would have been a second person watching the same empty addresses.

The full record, including the Ontario Securities Commission’s own rejection of the lost-keys explanation, is set out in the QuadrigaCX article on this site.

The mechanisms, compared

Mechanism Reduces Live exposure Failure mode
Sealed letter with the phrase Total loss of the backup A complete working key sits with another person for years The holder opens it, misplaces it, or dies first
SLIP-39 multi-share Loss or theft of any single share Several people learn a valuable secret exists Heirs cannot assemble the threshold, or have no SLIP-39 tool
Multisig with a co-signer Single-key loss and single-key theft A co-signer has to be chosen, paid and kept current The quorum becomes unreachable, and a 2-of-3 missing two keys is locked
Timelock or check-in service Heirs needing anyone’s cooperation The clock runs whether or not the owner is alive The date passes during the owner’s life, and later deposits are not covered
Qualified custodian The key-reconstruction problem Platform, insolvency and counterparty risk The estate process still applies and the account waits on proof of death
Instructions held by a lawyer Heirs not knowing what exists Fees, and one firm knowing the size of the position The firm merges, the file is misplaced, or the instructions go stale

Sealed letter. The exposure is described in the SLIP-39 specification’s own motivation section: “The usual approach to protecting digital assets is redundant backups, but when the asset itself is of significant and liquidable value, there is a substantial risk of the backup holder absconding with the asset.”

SLIP-39 multi-share. SLIP-0039, “Shamir’s Secret-Sharing for Mnemonic Codes”, was authored by SatoshiLabs staff with Jochen Hoenicke, created 2017-12-18 and marked Final. It splits a master secret so that “knowledge of fewer than the required number of parts does not leak information about the master secret”, across up to 16 groups of up to 16 members each, with a threshold at both levels. Trezor’s own guide states that Multi-share Backup runs on the Safe 7, Safe 5, Safe 3 and Model T, supports 1 to 16 shares with a recovery threshold, and is also implemented by Rabby, Electrum, Sparrow, BlueWallet, Wasabi and the Keystone hardware wallet.

Two properties matter for succession. SLIP-39 shares cannot be converted back to a BIP-39 phrase, which Trezor’s SLIP39 FAQ confirms and the specification attributes to BIP-39’s “overly coupled design”, so an heir needs a SLIP-39-capable tool. And the specification states that its design “does not provide a way to verify that the correct passphrase was used”, because every passphrase produces a valid seed. An heir holding the right shares and the wrong passphrase reaches a working wallet that is empty, and sees no error.

Multisig with a co-signer. Ledger’s own inheritance guide describes the common inheritance shape as one or two keys held by the owner and a remaining key held by a service such as Casa, Unchained or Nunchuk. The same guide states the failure mode plainly: “A 2-of-3 multisignature wallet becomes permanently locked when two signers are unavailable.”

Timelock or check-in. Ledger’s guide defines the category: “Timelocked inheritance, often called a ‘dead-man switch’, automates asset transfer when you fail to check-in for a preset period.” It also names the maintenance burden: “every time you receive new Bitcoin, you must manually configure the timelock for those specific funds. Miss this step once, and those funds won’t have inheritance protection.”

The two published implementations differ. Casa’s inheritance page describes a recipient designated in the app, and states that on a claim “Casa initiates a sequence of notifications to the original vault owner to check if they are truly inactive”, with no death verification or court order required. Nunchuk’s page describes an on-chain timelock set to a date chosen in advance, after which “our Platform Key is removed, and the signing requirement drops”; Nunchuk states those committed parameters are immutable.

Qualified custodian. Under the Advisers Act custody rule, 17 CFR 275.206(4)-2(d)(6), the term covers a bank or insured savings association, a registered broker-dealer holding client assets in customer accounts, a registered futures commission merchant, and a “foreign financial institution that customarily holds financial assets for its customers” on segregation conditions. The rule requires client funds and securities to be held “in a separate account for each client under that client’s name”, or in accounts holding only client assets under the adviser’s name as agent or trustee.

That restores the three missing components: an entity, a named account holder, and a death process. It substitutes a different set of risks, which the Prime Trust and FTX records on this site describe.

What I think is going on

The Quadriga story won because it is the better story. A young CEO dies on his honeymoon and the money is sealed in a wallet nobody can open. It gave a fraud the shape of a tragedy, and it made key succession feel like somebody else’s disaster movie.

It travelled fast, and through serious people. The Perkins Coie note I quoted above is careful, well footnoted, written by three specialists, and published six days after the monitor filed the Third Report. It still describes the exchange as having “apparently struggled to access this cryptocurrency”. Read that as a measure of how quickly a frame sets before the primary documents catch up. The frame is still setting nearly seven years later.

Key succession is a serious problem with a body count. Quadriga is not an example of it. Those two sentences sit together comfortably, and most coverage refuses to let them.

When people holding serious positions show me their setup, it is almost always the same shape. The cryptography is fine. Someone read about Shamir, bought the metal plates, worked out a 3-of-5, and thought hard about which relative gets which share. Then you ask who has ever done the recovery, and the answer is nobody, because doing it felt like tempting fate.

That is where it breaks. Your heirs get defeated by a bank that will not open a box without a grant of probate, by a share holder who moved to Lisbon in 2023, by a firmware version that no longer exists, or by instructions that say “use the derivation path” to a person who has never seen a derivation path. The mathematics is the one part that holds.

The passphrase behaviour in the specification is the piece I keep repeating to people. Every passphrase produces a valid wallet. Your heir types the shares, adds the wrong passphrase, gets a clean empty wallet, no warning, no error, and reasonably concludes the money is gone. Silence looks exactly like success in that moment, and a plan that can fail in silence is a plan you have never tested.

The cost of the plan while you are alive almost never gets priced. Every mechanism in that table decides who is able to take your money for the next twenty years. A sealed letter is a working key sitting in somebody’s house: a sensible trade at some amounts, and a bad one for a large position handed to a relative going through a hard decade. Choose it deliberately.

What reduces your exposure

Separate the inventory from the secret. Write down what exists, roughly where, and who to call: chains, wallet types, devices, the custodian if there is one, the lawyer, the accountant. That document holds no key material, so it can live somewhere convenient. The secret sits elsewhere under a different mechanism, and the inventory says only that it exists and how to begin.

Keep the seed phrase out of the will. A will can record that assets exist, name a fiduciary, and point to where instructions are kept, without containing the material itself. Since probate records can be ordered by the public in some jurisdictions, treat anything inside a will as publishable.

Get a lawyer, and mean it. Whether a personal representative has authority to act on a particular holding depends on the jurisdiction, on how the estate documents are drafted, and on whether fiduciary-access language is present. This article describes mechanisms and quotes statutes. It is not legal advice, and no article substitutes for counsel admitted where you live.

Size the mechanism to the heir who has to run it. A 3-of-5 SLIP-39 scheme handed to someone who has never opened a hardware wallet is a worse plan than a custodian account with a named beneficiary. Pick for the person doing this on the worst week of their life.

How to test the plan without exposing the position

An untested recovery plan is a theory. Nothing below moves the live assets.

  1. Start with the device’s own backup check. Trezor’s guide describes the feature: you tell the device “you want to run the backup process, but you do not want the device to remember the wallet backup”, and it compares what you type against what it holds. That confirms the words are transcribed correctly, and nothing else.
  2. Restore onto a second device or an offline machine and check an address. The success condition is one specific thing: the first receiving address matches the one you recorded in advance from the live wallet. Write that address down before you start and compare it character by character. A restore that throws no error has told you nothing.
  3. The passphrase goes into the test too. If you use one, skipping it voids the whole exercise, because the wrong passphrase produces a valid wallet and no failure message.
  4. Have the heir do it while you watch and say nothing. Ledger’s own guidance is to “have your executor practice the full recovery workflow, verify they can generate addresses”. Hand over only the materials they will actually have. If you find yourself prompting, the instructions are what failed, so fix those and run it again.
  5. Walk the retrieval path as well. Can they physically reach the deposit box. Does the firm answer. Is the third share holder reachable this year. Ledger’s guide is blunt about the box: heirs “need court orders to access the box, which can take months”.
  6. Test the exact quorum, with the exact keys that would be missing. For multisig, take your own key out of the exercise and confirm the remaining signers can still sign. A 2-of-3 that only works when you are in the room has not been tested.
  7. Put it on a calendar. Ledger’s guide suggests a six-month cycle covering devices powering on, PINs, firmware, box access and whether the written instructions still match reality. Any interval you will actually keep beats a better one you will not.
  8. Run it again after a move, a marriage, a divorce, a death among the share holders, or a large purchase. Each of those invalidates part of the plan without telling you.

Where structure helps, and where it stops

Assets held through an entity or a trust have a governing document that says who may act and in what order, and a successor authority that nobody has to establish after the fact. That settles who is permitted to try, and it can keep the holding out of a probate file that a stranger can order a copy of.

The other question stays open. A trust deed cannot reconstruct a key nobody wrote down, and no structure removes the need for a tested recovery procedure underneath it. DAG works on the entity and trust side of this alongside custody arrangements, which reduces certain risks and leaves others untouched: market risk, key compromise, and a plan whose recovery step has never been rehearsed. DAG is not a law firm and does not provide legal or tax advice, so the drafting sits with your own counsel either way.

Sources

Disclosure. Max Avery is affiliated with Digital Ascension Group (DAG). Investment advisory services are offered through DAG Wealth, an SEC-registered investment adviser (CRD No. 328627). Registration does not imply a certain level of skill or training. DAG is not a law firm and does not provide legal or tax advice. Custody arrangements with third-party independent qualified custodians reduce certain risks but do not eliminate them. Nothing here is investment, legal, or tax advice, or a recommendation to buy or sell any asset. This article describes matters of public record; charges are allegations and defendants are presumed innocent unless and until proven guilty.

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