Bitcoin Inheritance Planning

Bitcoin is a bearer asset. What you hold is not the asset itself, but the private keys needed to spend the bitcoin. Control of the keys is equivalent to ownership.

If the keyholder dies without leaving instructions and access to the keys or the seed phrase backup, the funds are permanently inaccessible. There is no legal process, no bank, and no court order that changes this.

If you want to understand the broader backup and storage system first, How to Store Your Seed Phrase covers the foundation. Seed Phrase Storage and Physical Security covers the location decisions that feed into an inheritance plan.

What Happens to Bitcoin When You Die?

Unlike a bank account, a bitcoin wallet has no institution to contact after the holder dies. There is no account reset process, no identity verification pathway, and no authority that can grant access without the seed phrase. A will naming a beneficiary does nothing without the keys.

This is the defining property of a bearer asset. Whoever controls the seed phrase controls the bitcoin. The same property that makes Bitcoin censorship-resistant also makes inheritance planning necessary.

Chainalysis has estimated that approximately 3.7 million bitcoin may be permanently lost, a portion of it from death and lost keys. What is certain is that without the seed phrase, the funds are gone regardless of what any legal document says.

An heir needs the seed phrase (or signing key access in a multisig arrangement) and instructions for how to use it. Most bitcoin holders have the first and not the second.

What Are the Four Bitcoin Inheritance Frameworks?

Four practical frameworks exist for ensuring heirs can access Bitcoin after the keyholder's death or incapacitation. They range from a simple sealed letter to a technically sophisticated timelock arrangement. The right choice depends on the keyholder's technical comfort, the amount at stake, and how much counterparty involvement is acceptable.

• Seed Letter. This is a sealed envelope or letter containing the seed phrase backup, passphrase instructions (if applicable, stored separately), and written recovery steps. It is held by a trusted person, an attorney, or in a secure deposit alongside a will. This is the simplest framework and adequate for smaller amounts or users who want a low-complexity starting point. The main limitation is premature access risk. Whoever holds the letter has access at any time.

• Timelock (Liana). This option is a Bitcoin spending policy with two paths. The owner's key can spend at any time. A recovery key held by the heir can spend only after a defined inactivity period. The owner refreshes periodically to reset the timer. If the owner dies and stops transacting, the timelock completes and the heir key activates. This option is fully self-sovereign with no counterparty. Section 4 of this article covers Liana in detail.

• Multisig Key Distribution. In a 2-of-3 multisig setup, one key is sealed for the heir as part of the inheritance plan. After the keyholder's death, the heir combines their sealed key with one of the remaining accessible keys to meet the signing quorum. This builds on an existing multisig setup without requiring a separate product. The limitation is that the heir must understand where the keys are and how to use them. What is Bitcoin Multisig? covers the multisig setup in detail.

• Collaborative Custody Services. Services such as Unchained and Casa hold one key in a 2-of-3 arrangement. Their key stays below the spending threshold during the holder's lifetime. After death, the service participates in heir recovery following legal verification of the death and the heir's identity. This provides professional support for heirs who are not technically capable of managing a recovery on their own. The tradeoff is counterparty dependency and ongoing fees. Collaborative Bitcoin Custody vs Solo Multisig covers these services in detail.

What Do Heirs Actually Need to Recover Bitcoin?

A seed phrase alone may not be enough. An heir who finds a metal backup but does not know the wallet type, how to use the coordinator software, or whether a passphrase is involved may not be able to access the funds. Instructions matter as much as the keys themselves.

A complete inheritance plan includes six items.

1. The seed phrase. On durable physical media (metal preferred). This is the root of all keys in a single-signature wallet.

2. The passphrase, if one is in use. Stored at a different physical location from the seed phrase. Both are required. Possession of one without the other is insufficient for access.

3. The wallet descriptor. For multisig wallets, the descriptor encodes the full quorum policy. Without it, the heir cannot reconstruct the wallet even with all the keys.

4. Step-by-step recovery instructions. Write it for a non-technical reader. Include the wallet software name, the address type, the derivation path, and the exact steps to restore and verify the wallet.

5. A named technical contact. A trusted person with Bitcoin knowledge who can help the heir through the recovery process.

6. The device location. Where the hardware wallet is stored, or explicit confirmation that any compatible device can be used with the seed phrase.

Many self-custody holders have durable backups and no recovery documentation.

If a passphrase is in use, the seed phrase and passphrase must be stored separately and both included in the inheritance plan. What is a Bitcoin Passphrase? covers the passphrase mechanics.

Before the plan is needed, test it. Have a trusted person attempt a recovery on a test wallet using the written instructions alone, before any real funds are at stake. The test reveals gaps in the instructions before a failure is irreversible.

What is the Liana Wallet Inheritance Approach?

Liana is a bitcoin wallet built around Miniscript spending policies, a structured language that allows composable spending rules such as an owner key that can always spend and a recovery key that can spend only after a defined number of inactive blocks. Liana uses this to implement inheritance without requiring a third party.

The owner's key, held on a hardware wallet such as Coldcard, can sign transactions at any time. A recovery key held by the heir is locked behind a CSV timelock. OP_CHECKSEQUENCEVERIFY is a Bitcoin script opcode that prevents the recovery path from activating until a defined number of blocks have elapsed since the last UTXO was moved.

The owner refreshes periodically and Liana tracks the timelock and alerts the owner when the refresh deadline approaches. A refresh is a standard transaction that resets the timer. If the owner dies and no refresh occurs, the timelock completes, and the heir key becomes spendable. The heir opens Liana with the wallet descriptor and their recovery key, and Liana guides the recovery process.

In plain terms: you set a timer for when the bitcoin can be spent, and you can reset the timer as often as you like.

Liana is entirely self-sovereign with no third party holding keys, no monthly fees, and no action required from the heir until the timelock activates. The wallet descriptor is portable, so any Miniscript-compatible wallet software can reconstruct the policy if Liana is unavailable.

The recommended setup uses Coldcard as the primary spending key and a second hardware wallet as the recovery key. The heir needs to understand how to open a Miniscript wallet, load the descriptor, and connect their recovery key device. Clear written instructions from the keyholder are still essential.

For users less comfortable with technical setup, a collaborative custody service or a well-structured seed letter with a named technical contact achieves the same outcome with lower operational complexity.