What will happen to your bitcoins when you’re gone?

Introduction

Ensuring the continuity of ownership of cryptocurrency assets is a critical challenge in private capital management. Unlike the traditional financial system, where inheritance mechanisms are clearly regulated, the digital asset sector is characterised by a high degree of individual responsibility. According to analysts’ estimates, about 20% of the total bitcoin supply is considered irretrievably lost, equivalent to billions of dollars effectively removed from economic circulation.

A significant portion of these losses is due not to technical failures, but to the human factor – the death of owners who did not leave the appropriate access protocols. In such cases, heirs may retain legal inheritance rights; however, the lack of technical control over private keys makes it impossible to exercise them in practice. The lack of pre-prepared mechanisms for transferring private keys results in assets remaining visible in the public blockchain registry but becoming mathematically inaccessible. Thus, a decentralised architecture creates a unique legal-technical paradox: assets exist economically but are functionally locked out of human control.

Specifics of decentralised assets

The traditional banking system is based on centralised management. In the event of a client’s death, the banking institution acts as a guarantor of the preservation of funds, and the transfer of ownership rights is clearly regulated by law. Heirs gain access to assets after providing title documents.

In the field of cryptocurrencies, the situation is fundamentally different due to the architectural features of blockchain technology. The decentralised nature of these systems and the absence of a single administrator make it impossible to apply standard password-recovery procedures or to grant third parties, including heirs, forced access. The principle of irreversibility applies: asset management is only possible with a private key. Accordingly, the loss of this cryptographic tool automatically leads to the complete loss of capital according to the paradigm “Not your keys, not your coins”, since no external party has the technical ability to intervene in the protocol to restore access. Courts, notaries, and financial institutions also lack such capability, even if inheritance rights are formally confirmed.

The impact of asset storage models on inheritance procedures

The effectiveness of exercising inheritance rights in the field of digital assets directly depends on the chosen model of capital storage. The architecture of the cryptocurrency market offers two fundamentally different approaches: custodial and non-custodial storage, each of which dictates a unique set of actions for successors and determines the technical probability of restoring access to funds.

In the custodial storage segment (centralised exchanges and services), the inheritance mechanism is structurally similar to banking procedures, as private keys are controlled by the platform operator. With an administrator present, heirs can regain control of assets by submitting an official request and providing the relevant title documents. Despite potential bureaucratic procedures, this path ensures the legal and technical feasibility of transferring ownership. At the same time, such operators may impose compliance checks, require probate documentation, or restrict withdrawals until procedural verification is completed.

On the other hand, when using non-custodial solutions (hardware or software wallets), the principle of complete digital sovereignty is upheld, with the responsibility for preserving assets resting solely with the owner, without the involvement of intermediaries. The critical element of access here is the seed phrase, which is the only tool for managing the wallet. In the absence of a reliable mechanism for transferring this information, restoring access becomes technically impossible even with legal inheritance rights, since the protocol does not provide for external administrative intervention. Accordingly, inheritance planning for such assets must be implemented by the owner during their lifetime.

Strategies for transferring digital assets

To give heirs access to non-custodial wallets, owners need to take specific technical and organisational steps. There are three main approaches, each varying in technical complexity and security.

Physical data storage method

The most accessible and widespread solution is classified as a low-tech approach. It involves recording critical information (seed phrases, passwords, PIN codes) on physical media, such as paper sheets or specialised metal discs that are resistant to thermal and mechanical damage, and then storing them in secure safes or bank deposit boxes. The key advantage of this method is its simplicity of implementation, which does not require any special technical skills. At the same time, it has significant vulnerabilities, including the risk of physical destruction of the medium due to force majeure, theft, or unauthorised access by third parties before the inheritance occurs. premature disclosure of information to persons who may abuse access.

Automated activity monitoring system method

A more technologically advanced option is known internationally as the “Dead Man’s Switch”. The algorithm for such software complexes periodically checks the owner’s presence, for example, by requesting confirmation via email. If there is no response within a set time interval, the system initiates the automatic sending of encrypted access data to pre-defined trusted persons. Although this approach provides a high level of automation for the transfer process, it is not without its drawbacks, including the risk of false positives due to technical failures, email service interruptions, or prolonged Internet outages on the part of the owner. In addition, such systems may pose cybersecurity risks if improperly configured.

Multi-signature protocol

This method involves creating a wallet with a complex access architecture, where several private keys, for example, two out of three existing ones, are required to confirm transactions. The keys are distributed among the owner, an independent, trusted person (a lawyer), and the heirs, effectively eliminating the problem of “exclusive sole access” and preventing a “block” of assets. The implementation of multi-signature is hampered by the considerable technical complexity of configuration and requires a corresponding level of digital competence from the heirs to correctly combine the keys in the future. Despite this, multisig remains one of the most balanced mechanisms for inheritance planning, as it allows controlled access without disclosing full key material.

Security protocols when drawing up a will

When formalising inheritance legally, it is critically important to avoid the common mistake of including confidential access data, in particular seed phrases, directly in the will. It should be borne in mind that during the formalisation process, the will passes through the hands of third parties (notaries, secretaries, technical staff, etc.). Such openness creates a direct risk of compromising the wallet and stealing funds, even before the heirs actually exercise their rights. In view of this, it is recommended to apply the principle of separation of information: an official will should only record the legal fact of ownership of digital assets, while specific technical instructions and access keys should be set out in a separate document, such as a Letter of Instruction, which is transmitted confidentially or stored separately from the main title documents. This approach reduces the probability of unauthorised disclosure while preserving the legal continuity of inheritance.

Minimising risks and preserving capital

To minimise the risks of losing digital capital, it is recommended to conduct a full inventory of assets, create detailed technical instructions for heirs, and ensure diversification of access key storage. Periodic review and updating of instructions is also advisable, especially in the event of asset relocation, wallet migration, or a change in personal circumstances.

In conclusion, the unique characteristics of digital assets require replacing assumptions about automatic inheritance with well-planned strategies. The key takeaways are: only advance planning ensures capital preservation; clear legal documentation and reliable technical protocols for private key transfer are essential; and without these, heirs may be unable to access assets regardless of legal rights.

At Manimama Law Firm

At Manimama Law Firm, we help businesses navigate this new reality effectively. We prepare documentation, manage application processes, and develop long-term crypto-compliance strategies.