Top 15 Ways to Transfer Bitcoin When You Die

Bitcoin is more scarce than gold and the 10th most valuable asset in the world with a $1+ Trillion market cap.

According to Security.org, 40% of Americans own Crypto and 63% of current owners plan on increasing their position in 2024. 

As an investor, it’s a lot more fun to think about financial freedom rather than what happens to Bitcoin when you die.

Cautionary tales about losing Bitcoin usually focus on being locked out of ‘whale wallets’ worth millions of dollars.

Regardless of the dollar amount, losing any amount of Bitcoin hurts.   

The first step in making sure this doesn’t happen to you is to set up a Bitcoin Estate Plan.  

A reliable strategy to safely transfer Bitcoin to your heirs can preserve your legacy and it’s a lot easier to prepare than you may think.  

Pros & Cons: Most Common Ways to Transfer Bitcoin When You Die

At a high level, your estate plan includes an inventory of assets, legal documents like a will or trust, and an instruction letter.

If you read our Pros and Cons of Bitcoin ETF vs. Bitcoin and decided to invest in the ETF, then you don’t actually own Bitcoin and transferring accounts to your heirs is easy. 

Actually owning Bitcoin means you have access to the keys which are safeguarded by a backup recovery seed that must be conveyed to your heirs when you die. 

Here are some common ways to physically transfer your Bitcoin keys when you die:

1. Letter of Instruction:  Detailed instructions of how to access your Bitcoin wallets should consider your heir’s crypto experience and their ability to execute on the plan in the wake of grieving your loss.  

• Pros:
  • It’s easy and a necessary component to your estate planning. 
  • Common practice for lawyers to hold and deliver tamper-proof sealed envelopes intended to be read by the named party per the instructions.
• Cons:
  • If you don’t have an estate plan, you’re relying on a single point of failure if your heirs are not able to locate or execute the instructions due to loss, damage, negligence or theft. 
  • Potential legal or tax consequences if the instructions and crypto are not included or named in a legal document like a Revocable Trust. 

2. On-Exchange: Leaving Bitcoin on an exchange is a convenient way to transfer crypto.  Your heirs will need to provide documentation and follow the instructions to gain access to a deceased family member’s account.  

Pro Tip: You can create a Coinbase account in the name of your trust.  Adding 3rd party 2 Factor Authentication (2FA), like YUBIKEY, is an option to further secure your account.  

• Pros:
  • It’s easy.  No different than getting access to your eTrade or Robinhood. 
  • Less fees to liquidate because you’re not paying network fees to send from a non-custodial wallet to an exchange.  
• Cons:
  • Exchanges always introduce third party risk.  Remember FTX?
  • Exchanges must comply with a legal order whereas your cold storage device has no such obligation.  A creditor, for example, could seek repayment and make a legal claim against your Coinbase funds.

3. Fidelity (custodian):  If you use the Fidelity Investments app, you can create a cash management account linked to a crypto account. Call customer service or use the app to view/update beneficiaries who will be authorized to access your account with the proper documentation upon your death.

• Pros:
  • You can buy and sell Bitcoin on Fidelity, just like Coinbase or another exchange.
  • Fidelity has their own in-house custodial service which is also used to custody the Bitcoin for their ETF.  
  • Storing Bitcoin on multiple exchanges can hedge against a single point of failure and to establish a higher cost basis for shorter term investments.
• Cons:
  • Crypto accounts on Fidelity can NOT be set up in the name of your Trust which could create a tax-disadvantage.  TOS can change at any time. 
  • Similar to a centralized exchange, Fidelity acts as the custodian. Your Bitcoin is held in an omnibus structure, meaning all client assets are stored together but recorded individually and NOT insured.

4. Safety Deposit Box: Storing Bitcoin in a dual-access safety deposit box at a bank is ironic, but it works.  According to the NY Times, safe deposit boxes aren’t as safe as they seem and provide no federal protection. 

Non-technical solutions, like an old school safety deposit box can reduce human error and other failure points. Here are a few examples for securing Bitcoin stored in a safe deposit box:

• Option 1:
  • Use a manilla envelope or fire-proof bag containing your device, full recovery seed, and/or partial recovery seed printed on paper or a metal sheet.  Seal the envelope/bag in a tamper-proof envelope.
  • You can keep the safety deposit key in a personal safe or if you don’t need to access the box again, consider giving the key to your lawyer.  Your Estate plan docs should contain the optional passphrase, a directive for key disbursement, and instructions to access your Bitcoin wallet(s).  
  • You can designate that the “contents of the safety deposit box” is passed to your heir as a gift.  Have your lawyer review the contract with the safety deposit box company to understand details about access controls.

If your death is expected, you can discuss this procedure with your heirs.  If your death is unexpected or you become incapacitated, when your legal Trust executes, the location of the box, the key, and the recovery seed with optional passphrase will be released.  

• Option 2:
  • Leasing multiple safety deposit boxes will add extra cost, but this strategy creates the redundancy or 2 of 3 multi-signature access.  (Remember to use tamper proof envelopes and indicate this in your letter of instruction.)
  • You could store 1 device and/or recovery seed on Box 1, and a device and/ore recovery seed #2 in the Box 2.  You could rent a third box or entrust your lawyer to safeguard signature #3.
  • For seed sharding redundancy, you could include a parts of the 24 word seed spread across 3 safe deposit boxes.  For example:
    • Box 1 contains words 1-8 & 9-16
    • Box 2 contains words 9-16 & 17-24
    • Box 3 (or your lawyer) has words 1-8 and 17-24

• Pros:
  • Storing your full/partial recovery seed and/or passphrase in a safe deposit box can double as a) self-custody backup locations if you lose keys while you’re living and b) account recovery for heirs when you die.  
  • A valid ID, physical key or other security checks + the bank manager’s key may be required to ensure secure limited access.  Read the fine print!
  • A safe deposit box in the bank’s custody is the most awesomely ironic way to store your Bitcoin which is the antithesis to banks.
• Cons:
  • If you rotate your keys, or change the location of your backup seed, you’ll need to update your Trust docs and contents of the safe box.
  • If using a lawyer, consider the risk of attorney-client privilege being revoked due to tyrannical government behavior like executive privilege, emergency, or marshall law.  If your lawyer only has instructions for ‘who should get what’, you’re at less risk than if your lawyer has your keys, recovery seed and passphrase.

Pro Tip: An optional passphrase can protect you against the government seizing your safe deposit box since the passphrase is required to access your Bitcoin.  If you’re using a passphrase to secure your wallets, never store the passphrase and recovery seed together in the same location.  A letter sealed in a tamper proof envelope that is held by your lawyer is a simple solution if your recovery seeds are held separately. 

5. Shamir Secret Sharing (SSS): SSS is an alternative to multi-sig if you’re concerned about relying on a 3rd party tech provider’s signature for multi-sig to work. Secret sharing uses unique cryptographic ‘key sharding’ to divide the recovery seed into parts or ‘shares’ of the whole. The key can be reconstructed from some, but not necessarily all, of the shares.

Option 1: Use a wallet that has Shamir Secret Sharing built in, like Trezor, to cryptographically manage the recovery process.  You’ll need to define the number of ‘shares’ to meet the threshold.  For example, 3 of 5 means that 3 of the 5 shares need to collaborate to recreate the wallet.  

Test this process out before blindly relying on this method to work correctly.  

Option 2: You can simulate a manual, although less secure version of Option 1 by splitting up your recovery seed words amongst different trusted people.  Provide detailed instructions to the executor for compiling the partial seed phrases including the contact information for the parties required to come together to restore your wallets. 

• Pros:
  • SSS is a tried and true fan favorite with Bitcoin OGs.
  • No trusted 3rd party required. 
• Cons:
  • Requires advanced technical skills and likely some trial/error to set up the Shamir (SSS) for the first time.  
  • Risk of parties colluding resulting in unauthorized access and loss of Bitcoin.
  • More innovation and development is required to make this solution viable for broader adoption (ie – MuSig and SSKR). 

6. Single-sig: A single signature wallet is what you’re probably most familiar with when buying a Ledger, Trezor or ColdCard.  One private key is used to sign transactions.  Multiple Bitcoin ‘child’ wallets can be created using a single backup recovery seed.  

Non-custodial single-sig wallets have a 12-24 word backup seed that can be used to recover the wallet.  

Some hardware devices use a PIN code to access the wallet.  The PIN may only be valid for the original wallet device or manufacturer even though the 12-24 word recovery seed is wallet provider agnostic.

Your estate plan docs should carefully disclose to your heirs the operating instructions and location(s) of your recovery seed with optional passphrase or PIN.

• Pros:
  • The simplest solution to set up, especially if you already use cold storage.  
  • To transfer upon death, your recovery seed must be located (ie – in a safe, safety deposit box, with a lawyer).
• Cons:
  • Lack of communication and poor technical skills may limit your ability to effectively protect your recovery seed.
  • If your seed can’t be located, your funds will not be accessible. 
  • Less secure compared to using a Single Signature + Passphrase. 
  • Your next of kin will not realize any tax benefits (step-up) if you failed to include Bitcoin in your estate plan.

7. Single-sig + Passphrase: Non-custodial Hierarchical Deterministic single-sig wallets have a 12 or 24 word backup seed + and optional 13th or 25th case sensitive  alpha-numeric phrase to recover the wallet.  

The passphrase creates an additional layer of security.  If your recovery seed is leaked or discovered, the passphrase ensures your wallet can’t be accessed.  

Define how you will provide the estate executor with a backup seed, passphrase (if applicable) and instructions for usage. Your seed phrase backup method can be customized and stored outside of your trust but you could leave the passphrase in a sealed letter to be retained by your lawyer to deliver to the executor.

• Pros:
  • More secure than a Single-signature without a passphrase because even if someone discovers your seed, they would need passphrases to access the other derived wallets.  
  • Recovering a wallet with a passphrase is common and there’s no additional skill level required compared with single-sig.  
• Cons:
  • The passphrase is case sensitive, so if your instructions are incorrect or if your executor enters the wrong passphrase they will not be able to access your wallet.  
  • Single point of failure if the executor fails to keep the recovery seed safe and/or passphrase through loss, theft, accident or negligence. 
  • May necessitate a non-heir executor especially if you are backing up your recovery seed and passphrase by splitting it up amongst your successor heirs.

Pro Tip: Storing your recovery seed and passphrase in different locations is more secure than storing them together.  To avoid a single point of failure, consider splitting your 12/24 word seed and your passphrase between your heir(s) and a non-heir professional executor who is familiar with Bitcoin.

Note: If you think about your 12-24 word seed like a multi-level bank vault, then the passphrase is the key to a specific floor.  If you have kids, you could leave each child a separate passphrase to unlock their portion.

8. Multi-sig + Passphrase (Non-Custodial) 1 of 2.  A multi-sig wallet requires multiple signatures to process a transaction.  Multisig 1/2 (SeedA+PassphraseA || SeedB+PassphraseB).

Note: the ‘non-custodial’ reference means that none of the signatures is managed by a 3rd party application or service provider. 

Seed A – Safeguard your 12-24 word recovery seed.

• Passphrase A – Keep separate from your recovery seed.  For example, in a different location like a safe deposit box or sealed letter with your lawyers.

Seed B – Choose a location, or individual like your executor to custody the second seed required for signing transaction.  

• Passphrase B – The second passphrase can be communicated to your relatives via instructions from your lawyer or you can get creative using a deadman switch or account recovery process to relay the case sensitive word.

Pro Tip: If you make ‘Seed B’ a BIP85 derivation of ‘Seed A’, you will be able to rebuild Seed B even if your heir loses their seed.  This is an advanced tactic and must be tested before you implement it.  

• Pros:
  • Extra redundancy compared with a Single-Sig + passphrase.  Eliminates the ‘single point of failure’ risk.
  • Passphrase gives your security a boost.  

• Cons:
  • More complicated to safeguard compared to Single-sig or Single-sig + passphrase.  
  • Risk that the second recovery seed/passphrase is discovered and used to recreate your wallet.  
  • Increased Bitcoin transaction fees for multi-sig compared with single-sig.

9. Multi-sig (Non-Custodial) 2 of 3 or more: 2 of 2, 2 of 3, 3 of 5 and 4 of 5 are common configurations for multi-signature Bitcoin wallets.  

Not my personal favorite solution because it is complicated, not simple.  If you use any multi-sig on a cold storage device, ALL of the recovery seeds and seed phrases are required to recreate the wallet if the device is defective or you want to change providers due to the master xpub requirement.  If you’re married to multi-sig, then sharing the master xpub with your lawyer or included in the estate plan docs could act as a safety net but you’re giving up privacy.

• Pros:
  • Redundancy is built into a multi-sig setup.
  • 1 of 2 > 2 of 3 > 3 of 5 > 4 of 5 > 2 of 2 and other ‘all or nothing’ combinations.
• Cons:
  • If a device is lost or damaged, ALL keyholders must provide their keys to restore the wallet or it’s considered unrecoverable. 
  • Multi-sig = multiple points of failure safeguarding and producing the recovery seed.
  • Transaction fees can be 2x higher with multi-sig. 

10. Timelocks: I’m a big fan of timelocks, which are a type of Bitcoin Smart Contact that executes a transaction only after a certain amount of time passes assuming you are dead or incapacitated.  

Your heir would set up their own wallet and generate a receiving address.  You create a time-locked transaction to sweep your account balance to the heirs address.  

• Pros:
  • Works best when you’re sending to a destination address on-exchange that can be recovered by your designated beneficiary. 
  • Option to add a decaying multi-sig where the number of keys required decreases over time.
  • No trusted 3rd party required.   

• Cons:
  • Requires an advanced knowledge of Bitcoin and usage of specific hardware or software wallets with Timelocks enabled.  
  • Requires transacting with your Bitcoin wallet on a regular basis to avoid inadvertently triggering the time lock function.
  • If you change your wallet or transact (send/receive) Bitcoin, you will need to update your transaction and the timelock placed on it.  
  • Testing on signet or testnet is highly recommended.
  • Fees could be more in the future.  Consider setting up at 1 sat/vByte and your heirs can do a ‘child pays for parent’ fee increase for the transaction. 

11. Multi-sig (Custodial): A Custodial Multi-sig wallet requires multiple signatures to process a transaction.  One of the signatures is provided by the 3rd party hardware or software developer depending on what solution you choose.     

A beneficiary may be designated within the 3rd party’s app interface, if available, which functions like a deadman switch.

• Pros:
  • Redundancy is built into a multi-sig setup with 2 of 3, 3 of 5 and 4 of 5 signatures being common configurations.  
• Cons:
  • Transaction fees can be 2x higher with multi-sig. 
  • Some multi-sig providers require that they retain one of the keys required to authorize adding counter-party risk in the case where they go out of business, commit fraud or suffer a security breach.  
  • 2 of 2 requires both your signature + the 3rd party’s signature.  If one signature is mismanaged, your funds are unrecoverable.  

12. Duplicate Hardware Wallets: I don’t love this solution as a standalone due to the increase risks of device failure and/or user error by your trusted executor or heir. Actively maintaining the device firmware/software updates, securely backing up the PIN, and using multiple secure locations for storage is critical for this simple solution to work.
    • Pros:
      • Eliminate the need to backup 12/24 words on paper, steel, or digitally by relying on a device specific PIN Code recovery.  
    • Cons:
      • Improper firmware updates, susceptibility to phishing and counterfeit wallet software or firmware installation could inadvertently drain your funds.  
      • Loss of the recovery PIN = unrecoverable accounts.
      • Subject to hardware failure, software bugs and bitrot. Bitrot happens when ‘bits’ on the SSD/HDD randomly flip (change) causing data corruption. 

13. Deadman Switch: A dead man’s switch triggers an event to occur, like sending an email or signing a transaction, when the switch is no longer being ‘held’. 

For example, there are email-based services that send you a link to click every X days.  If you don’t click the ‘reset link’ to confirm you’re still alive, the switch will trigger and complete an action like sending an email message containing instructions to access your wallet. 

Google provides an Inactive Account Manager service, which you can use to authorize trusted contacts to access Google Drive.  A saved document on your drive could contain instructions, partial/whole recovery seeds and/or passphrases.   Google also has a ‘send later’ option that you can regularly edit to disarm.  Determine how much you trust Google since you won’t be around to verify if everything works according to plan.  

• Pros:
  • There’s no work for your executor or heir to complete since the process is automated and managed by you.  
  • A dead man switch can be used in addition to other backup and recovery methods.

• Cons:
  • Your executor or heir still needs to manage keys to access the wallet that manages the address the deadman sent to unless the address is for your custodial centralized exchange, like Coinbase.
  • While alive you need to regularly update and extend the future date for the smart contract or script to expire. If any of the automation you set up fails to execute, your crypto may be lost forever.  
  • Sounds good in theory, but this is difficult to put into practice without opening up different attack vectors due to the device, user interface, malware on your heir’s devices and/or the 3rd parties own technical risk.  
  • A deadman switch that triggers sending your recovery seed electronically is even more susceptible to cyber risk.  Never store or transmit your full backup recovery seed online.

Pro Tip: Using a “deadman switch” requires your trusting the service provider isn’t malicious and won’t get hacked.  To reduce the third party risk, you should consider using cryptography to encrypt your message.  Proton mail provides an encrypted messaging system by default. 

For example, you can set up a Protonmail account and use PGP to encrypt the email message like this: 

• Both the sender and receiver install the PGP tool on your computer.  
• The message receiver creates a public and private key.  Make sure you are using your PGP public key (not Bitcoin public key).  
• The receiver sends the public key to the person who will send the encrypted message.
• The sender encrypts the message using the public key and sends the message now or in the future.
• The receiver decrypts the message with the private key.

Your deadman switch could contain information like the location of your recovery seed, the code to your safe, instructions for locating your web and mobile wallets.

14. Custom Solutions: The crypto community has no shortage of bespoke solutions for leaving Bitcoin to your loved ones.  Most of the DIY solutions you’ll read on forums are complicated, subject to technical vulnerability and create a human point of failure.  

Examples of custom Bitcoin inheritance strategies…

• Use a cryptographic cipher, like PIGPEN which has been around since the Freemasons in the 1500s.  
• Encrypt the seed phrase and give the encryption key to your kin for safekeeping.  Consider a backup copy stored in a safe or safety deposit box.  The encrypted seed phrase can be included in your legal Will or Trust docs.  Store a backup of the encryption key on an encrypted zipped folder on a flash/hard drive.  Back this up on a stamped metal sheet or laminated paper stored in a safe or safety deposit box  Option to transmit the encryption key through a deadman switch.  Be sure to provide instructions for decrypting the encrypted data and executing the unencrypted information.

Pro Tip: don’t do this on a machine that is connected or has been connected to the internet.  Never type your seed on your machine to avoid a malicious keystroke logger that’s hiding on your machine. 

• Stenography.  Some folks go with the hide in plain sight like embedded into a picture or another everyday object.  
• Multi-sig + a time lock, called a decaying timelock, locks your Bitcoin in a ‘2 of 3’ multi-sig functioning like a “deadman” switch.  One key is in self-custody and the second key is behind a timelock and needs to be refreshed regularly (ie – annually or semi-annually).  Provide the second key to your heirs prior to death for safekeeping and transfer your self-custodied key as part of the estate plan.  If/when you die, the timelock will expire and the second key will work when combined with the primary key transferred via the estate. 

15. Digitally Sending your Seed:  At the bottom of the barrel when it comes to transferring Bitcoin after you die and most likely to be hacked would be a method that involves sharing your seed electronically via audio, video, image, SMS or as an email attachment.  Just don’t!!

As you can tell from above, there aren’t any widely accepted, user-friendly solutions supported in the market that don’t involve one or more critical security risks including: 

• Exposing keys to internet connected devices
• 3rd party custodial management of some or all of the process
• Ambiguous customer support and/or lack of US legal presence
• Reliance on inexperienced participants (ie – your family)
• Possibility of unrecoverable wallets and funds
• Errors, omissions, fraud and negligence

Pro Tip: Regardless what method you use to transfer your crypto, conducting a dry run with your trusted parties may help you identify steps that need clarified or updated over time. 

Choose your options carefully and consult with a qualified professional experienced in Bitcoin inheritance planning.  

Note: Stratus does NOT provide investment, legal or tax advice.  All information in this article is for educational purposes and should not be interpreted as investment, legal or tax advice.  The opinions expressed are those of the author for informational purposes and neither Stratus nor the author are liable for any errors, inaccuracies or omissions.  Digital assets, such as cryptocurrencies or decentralized finance, present unique risks for investors.  For investment, legal, tax, or other financial guidance you should consult your own advisor.