E308 Have a Placeholder Bitcoin Inheritance Plan

A placeholder bitcoin inheritance plan may be the solution to spur bitcoiners into action, rather than pursuing a “perfect” plan. Instead of holding off on a plan until it’s perfect, have a placeholder plan in the meantime in case anything happens to you while you are still perfecting your inheritance plan.

Perfect is the enemy of done, and using a placeholder plan may help avoid overthinking and analysis paralysis.

Why bitcoiners need SOME inheritance plan

With bitcoin, there is no default safety net. Other assets, like a regular bank account, are connected to centralized institutions, meaning the funds won’t be lost. Banks and brokerages offer features such as password recovery. You heirs can submit letters testamentary to these institutions to make a death claim on your assets. Even if no one claims in a timely fashion, the funds don’t just disappear, they go to the state’s unclaimed funds.

But not with bitcoin! You need a plan for your bitcoin. The cryptographic security solutions (password, seed phrase, etc.), also make it hard for your heirs to access your bitcoin upon your death. So even though 60% of people have no estate plan, a bitcoiner MUST have some kind of plan to avoid catastrophic loss

Baselayer bitcoin inheritance plan

This doesn’t have to be a plan that you love; t’s just a placeholder until you complete your treasure map or other “perfect plan.”

Once you have your “perfect” plan, don’t just scrap the placeholder. The placeholder can shift to your backup plan. Even with traditional estate planning, people name successor executors and backup beneficiaries. Think of your bitcoin plan in the same way. It’s your own unclaimed funds scenario. If your carefully crafted plan doesn’t work, at least you have a backup plan in place.

Placeholder bitcoin inheritance plan must be frictionless

Your placeholder plan must be easy for you to set up or else you won’t do it. Otherwise, you’ll continue pondering that elusive perfect plan (or fail to have a backup).

First, your placeholder plan should be low cost regarding money and time. It should be easy to do yourself with minimal need for outside assistance.

Second, it should be a plan that you know will work to avoid catastrophic loss, even if it sacrifices a little bit of what you care about. For example, you may have to give up client information, or rely a little bit on a third party like a professional executor, or maybe it’s not your ideal security situation. As long as the placeholder plan falls within tolerable thresholds, you can be willing to sacrifice a little bit to not lose a lot!

I haven’t fleshed out a good placeholder plan yet, but a good place to start is a DIY will coupled with some version of a poor man’s multisig, while using a professional executor as a keyholder.

Again, I know this is not exactly the plan you want, but set it up so that it works for now. Otherwise, there is no safety net while you are developing your prefect plan.

Probate (can apply to Bitcoin)

My book, “How Probate Works,” will help you understand the foundations of probate. This should give you guidance as you develop your plan, because you’ll learn about situations that your heirs may encounter after your death.