If you have a multisig, who should hold keys as part of your bitcoin inheritance plan?
Multisig is a great way to reduce risk of theft or catastrophic loss by reducing single points of failure. Michael Flaxman does a nice job explaining why to use multisig.
But what happens upon your death? You’ll want one (or more) of your keys held by someone other than you. Let’s review some good options for who.
Bitcoin custody service
Some advantages of hiring a pro keyholder:
- Expertise. These guys appear to know what they’re doing. So you won’t have to worry much about them losing their keys, maintaining good opsec, or generally keeping up to date.
- Immortality (sort of). Even if the founder or your main point of contact dies, the business itself will carry on and be there after your death (unless they go out of business, of course)
- Handholding for your heirs. Both Casa and Unchained offer services to guide an executor or heir who is completely clueless about seed phrases, multisig, etc. So not only are they one of your
And a few disadvantages:
- New. Custody services, collaborative custody, whatever they’re called, it’s all very new. So it’s hard to predict if they’ll stick around, change their focus, or what business standards they’ll adhere to. Only time can tell
- No probate expertise. While these guys are clearly experts in custody and security, they don’t have experience with probate and executor issues. No shame there, even most “estate planners” and financials advisors don’t really understand probate, either.
- Cost. Yup, they’re in business, so they charge fees (varies depending on the package and services you need). Unchained has a 2 of 3 service where there’s no fee now, only a $25 fee if/when you need them to sign a transaction.
Just like with estate planning in general, it’s good to have a great executor to run your estate upon your death.
Some pros of having a professional executor hold one of your multisig keys:
- Probate expertise. A professional executor will know all the ins and outs of probate, the courts, and tax issues.
- Highly regulated. For better or worse, a professional executor (usually an attorney or bank) is bound to all sorts of ethics rules, fiduciary duties, or banking regulations. So at least you know he has plenty of guide rails. And if anything goes sideways, your heirs will have well-established procedures for remedies against him.
What are the cons or having a professional executor hold one of your multisig keys?
- Try finding one. According to our clients, it’s very hard to find a good professional executor. Bank have high net worth minimums, and even then have interviews and committees to decide if they want your estate. And apparently they’re aren’t many reputable individual/attorney professional executors out there.
- AND knows custody. So it’s hard enough to find a good executor. Now compound that by finding one who’s at least a little experienced with bitcoin. Else you’ve just added a new risk vector, some dude who’ll lose his keys, get phished, and let his hardware wallet firmware stagnate un-updated.
Family or friends
A trusted family or friend sounds ideal, right? Someone you already know and trust. If you have shared interests, they may already be down the bitcoin rabbit hole with you. Heck, they may even be an heir.
The possible downside is that they simply don’t want the burden of being an executor (of sorts). Probating and settling an estate can be a long, time-consuming, and headache-inducing slog, So even if your family or friend has the expertise to handle the custody of your multisig key, they may not want that burden of responsibility.
If you want to learn more about probate in general, please check out my book, “How Probate Works.” I don’t have a Bitcoin chapter yet, but you will get a sense of how the probate process applies to your Bitcoin situation.