An inheritance plan that does not leak the secret

An inheritance plan has to do two things that pull in opposite directions. It must let someone reach your bitcoin after you die. And it must not let anyone reach it before — including the person you are relying on.

Get the first wrong and the coins are gone forever, which is the outcome most people are worried about. Get the second wrong and you have simply given your bitcoin away early, to someone who now has years of opportunity and every ordinary human pressure acting on them. That failure is quieter and nobody plans for it.

Almost everything difficult about this subject comes from holding both requirements at once. Nothing here is legal or tax advice, and this is a subject where a professional in your own jurisdiction earns their fee.

A sealed envelope on a desk beside a closed laptop and a set of keys, afternoon light, nobody in the room.

Image to come

1Separate three different things

Most bad plans collapse because they treat this as one problem. It is three, and they have completely different security requirements.

• The knowledge that bitcoin exists. Somebody must learn this after you die. If nobody does, everything else was irrelevant. This part is not secret in any useful sense — it only needs to be reliable.
• The instructions for how to reach it. What devices exist, where they are, what order to do things in, who to ask for help. Sensitive, but not sufficient to steal with if written properly.
• The secrets themselves. Seed words, passphrases, PINs. These should never be assembled in one place, by anyone, until they are actually needed.

A plan that keeps these three separate can be robust and safe at once. A plan that merges them — the classic envelope containing the words and the explanation together — is a wallet with a delayed fuse.

2Your will is the wrong place

This is the most consequential mistake in the subject, and it is made by careful people acting in good faith.

In many jurisdictions, including much of Canada, a will submitted to probate becomes a public document. Anyone can request a copy. That means seed words in a will are seed words published, and a passphrase written into a bequest is a passphrase disclosed to whoever cares to look.

• Never put seed words, a passphrase, or a device PIN in a will. Not in the body, not in a schedule, not in an annex.
• Do not put exact storage locations in it either. A published document naming the bank and the box number is a map for a stranger.
• Assume anything in the will may be read by people you did not choose, at a moment when your estate is publicly known to contain valuable assets.

What the will should do is establish authority and point onward: that a bitcoin estate exists, who inherits it, and that a separate letter of instruction is held by a named person or firm. That is enough to give your executor standing without disclosing anything worth stealing.

The will says the treasure exists and who it belongs to. It must never say where the shovel is.

3Choosing the mechanism

Several arrangements solve the timing problem — access afterwards, none before. They differ mostly in how much competence they demand from your heirs and how much they cost.

The first two are where most people should look. A 2-of-3 multisig is already the shape of an inheritance plan — you simply have to decide who holds the third key and under what conditions it becomes available.

4The failure that loses the most coins

Not theft. Not fire. An heir who cannot execute the plan.

People design elaborate arrangements and hand them to a spouse or a child who has never owned bitcoin, has no idea what a PSBT is, and will be attempting this in the worst month of their life. The plan is technically perfect and practically inert.

• Write for a stressed beginner, not for yourself. Assume no prior knowledge, name specific software, and describe what each screen will look like.
• Name a technical helper explicitly. Someone competent your heirs may call, who is not the same person holding a key. Ask them first.
• Say what not to do, in bold, near the top. Do not type these words into a website. Do not photograph them. Do not accept help from anyone who contacts you first.
• Include the boring specifics. Which wallet software, which device, what a passphrase is and that one exists, roughly what the balance should be so they know when they have found all of it.

5Making sure it is found

A perfect plan nobody discovers is identical to no plan. This is the most common total loss in bitcoin inheritance, and it is entirely preventable.

• Tell at least two people that a plan exists and where the instructions live — not what they contain.
• Make sure the executor knows before they are the executor. Discovering a bitcoin estate cold is a poor start.
• Keep the pointer somewhere ordinary. Wherever your important documents live is where someone will look. A brilliant hiding place is a failure mode.
• Do not rely on a dead man's switch alone. Automated services can fail, lapse, or shut down, and they can also fire early — which discloses everything while you are alive and well.

There is a real tension here with key geography: everyone who knows is a person who could be pressured or could talk. Two informed people is usually the right balance between discovery and exposure.

6Rehearse it with the people who will use it

Every other backup on this site gets tested. This one almost never does, which is strange given it is the only one guaranteed to be used at a moment when you cannot help.

• Build a rehearsal wallet holding a trivial amount, using the same structure as the real one.
• Give your heir the instructions and leave the room. Watch where they get stuck without helping. Every place they hesitate is a place your document is unclear.
• Have the third-party keyholder participate, so their part is not theoretical either.
• Rewrite the instructions afterwards, using the words your heir actually used rather than the ones you assumed they knew.

7The Canadian tax wrinkle

Worth knowing, and worth taking to a professional rather than to a forum.

In Canada, death generally triggers a deemed disposition of capital property at fair market value, which can create a capital gain on your final return even though nothing was sold. Bitcoin is property for these purposes. That means an estate can owe tax on coins the heirs have not yet been able to reach — which is an unhappy combination if the access plan is slow.

• Keep records of what you paid and when. An heir who cannot establish a cost basis is in a much worse position.
• Consider the liquidity question. If the estate owes tax, something has to pay it.
• Tell your accountant the asset exists, in general terms, while you are alive.

8Plans rot

An inheritance plan describes a world that keeps changing: devices get replaced, wallets get upgraded, people move, relationships change, and companies disappear.

• Review annually, at a fixed time you will not forget. Pair it with something you already do.
• Re-check after any change to your wallet setup, your keyholders, or your family.
• Date every version and destroy superseded copies. Two contradictory sets of instructions is worse than one imperfect set.
• Confirm your third party still exists and still offers the service you are relying on.

The short version

Separate the knowledge that bitcoin exists, the instructions for reaching it, and the secrets themselves. Keep all three out of your will, which may become public — the will should only establish authority and point to a separate letter. Choose a mechanism where access arrives after you are gone and not before, write the instructions for a stressed beginner, make sure two people know the plan exists, and rehearse it with the person who will have to do it.