Authority & Documentation Gaps in Bitcoin Custody

Where legal documents authorize action that Bitcoin custody systems do not permit.

This reference is published by CustodyStress, an independent Bitcoin custody stress test that produces reference documents for individuals, families, and professionals.

An executor receives letters testamentary from probate court. They take the documents to the bank, and the bank releases the funds. They contact the brokerage, and the shares transfer. Then they turn to the Bitcoin. There is no institution to contact. No one to present the court order to. The legal authority is complete. The Bitcoin has not moved.

A trustee is named as successor in a trust document. The trust says they can manage the Bitcoin. But the Bitcoin doesn't respond to trust documents. It responds to private keys. A spouse holds a power of attorney. The POA covers financial assets. But no exchange, no wallet, and no network has a process for accepting it.

Common questions that surface include:

– "Does a will or trust give my executor access to Bitcoin in self-custody?"

– "Can a power of attorney access a hardware wallet or seed phrase?"

– "What happens if the legal documents are valid but no one has the keys?"

This reference traces where that separation creates observable friction. It examines how estate documents, powers of attorney, trust instruments, probate orders, and ownership claims interact with custody systems that were not designed to respond to any of them.

Includes (observed patterns):

– Executors with court authority but no keys

– Trustees with trust language that cannot be executed technically

– POA agents blocked by timing, scope, or third-party refusal

– Probate orders that cannot compel self-custody systems

– Multi-party disputes where key control outruns legal resolution

The memos cited here describe observed behavior under defined conditions. They do not provide legal, financial, or custody guidance.

Legal documents create authority. Bitcoin custody requires keys.

Estate Documents That Stop at the Custody Boundary

Estate planning for traditional assets assumes that naming an executor and listing assets in a will or trust creates a functional chain of authority from death to distribution. The executor receives court authority. The executor contacts the institution holding the asset. The institution verifies the authority and releases the asset. Each step depends on the previous one, and the system was built so that legal authority produces operational capability.

Bitcoin breaks this chain at the institutional step. There is no institution to contact. The observations in Bitcoin estate documents needed trace how traditional estate documents address who inherits but not how they access. A will can name a beneficiary. It cannot provide a seed phrase. A trust can designate a successor trustee. It cannot teach the trustee how to operate a hardware wallet. Two parallel documentation layers exist — legal authority and technical access — and gaps in either can defeat succession.

The choice between estate planning structures introduces its own complications. The patterns traced in Bitcoin in a will versus a trust describe how each structure creates different dynamics around probate, privacy, timing, and control. A will subjects Bitcoin to probate — a public process with court oversight and potential delays. A trust avoids probate but requires that Bitcoin be properly funded into the trust during the holder's lifetime. The funding problem for Bitcoin differs from traditional assets. A bank account transfers to a trust through retitling. Bitcoin transfers through mechanisms that create gaps between legal ownership and operational custody control, as documented in revocable living trust funding for Bitcoin.

When a holder attempts to integrate Bitcoin into an existing estate plan, the process described in adding Bitcoin to an estate plan exposes the gap between legal documents and technical custody. The holder is present. No emergency exists. The integration still surfaces mismatches between what the legal instrument authorizes and what the custody system requires for access to actually transfer.

Power of Attorney Instruments and Activation Gaps

A power of attorney grants an agent authority to act on a principal's behalf. For traditional assets, the agent presents the document to a bank or brokerage, the institution verifies it, and the agent gains account access. The question of whether a power of attorney covers Bitcoin contains two distinct inquiries that often get conflated — whether the legal document grants authority over Bitcoin as an asset, and whether that authority produces practical access to Bitcoin held in self-custody. A POA may cover Bitcoin as a matter of law while providing no mechanism to reach it.

The scope of authority adds another layer of friction. Standard form provisions authorize "managing digital assets" or "conducting cryptocurrency transactions" without defining these terms operationally. The observations in limited power of attorney scope for Bitcoin describe what happens when an agent attempts to act and encounters uncertainty about which specific Bitcoin operations fall within the granted authority. Signing a transaction, initiating a recovery procedure, and migrating funds to a new wallet are technically distinct operations. Whether general language covers each of them depends on interpretation.

Activation timing introduces a separate failure surface. A durable POA may activate immediately or spring into effect only upon incapacity. The timing gaps described in durable POA timing activation trace what happens when the principal becomes partially impaired — still communicating but making inconsistent decisions, remembering some credentials but not others. Whether the agent has authority depends on activation language and incapacity assessment. For Bitcoin custody requiring precise passwords and procedures, this ambiguity creates periods where neither party can act effectively.

Springing POAs present the sharpest version of this timing problem. The springing power of attorney activation barriers trace the gap between when Bitcoin access becomes operationally necessary and when the agent's authority formally activates. Incapacity determination requires physician certification, which takes time. Custody access may be time-sensitive — a transaction window, a tax deadline, a market event. The POA's protective design, intended to preserve the principal's autonomy, creates a delay that custody systems do not accommodate.

Even when the POA is valid and activated, third-party acceptance remains uncertain. The patterns in third-party acceptance of power of attorney for Bitcoin describe what happens when an agent presents a POA document to exchanges, custody service providers, or other entities. Traditional financial institutions have procedures for verifying and accepting POA documents. Bitcoin-adjacent services may not. Responses range from confusion to outright refusal. The document grants legal authority. The entity receiving it has no obligation or established process to act on it.

State statutory POA forms add another dimension. The observations in statutory POA forms and digital asset scope describe how state-provided templates use language drafted for traditional financial assets. When principals check boxes granting authority over "digital assets" or "financial management," the question of whether that language covers seed phrase recovery, wallet migration, or multisig coordination depends on interpretations the form's drafters did not contemplate.

Trust Language That Does Not Map to Technical Reality

A trust document includes provisions about Bitcoin. The language was drafted, reviewed, and executed. It appears valid — properly structured, clearly written, legally formatted. Then someone tries to act on those provisions. The trust says the trustee has authority to manage the Bitcoin. The Bitcoin does not respond to authority. It responds to keys. The gap documented in Bitcoin trust language that is unenforceable traces what happens when legal provisions reference concepts like "custody," "management," and "distribution" that assume institutional intermediaries. The terms carry legal meaning. They do not unlock anything on their own.

When trust terms become outdated, modification presents its own challenges. The observations in Bitcoin trust modification describe the gap between legal approval and operational implementation. Courts approve trust modifications when requirements are met. Beneficiaries consent under certain conditions. These procedures were designed when trusts held stocks, bonds, and real estate. A court can approve a modification to trust custody terms. The court cannot ensure that the modified terms map to a functioning custody configuration.

Pourover will structures encounter a specific handoff gap. The pourover will and seed phrase handoff patterns describe what happens when residuary estate assets flow from executor custody to trustee custody. Traditional assets transfer through institutional channels. Bitcoin requires a technical handoff — of keys, credentials, device access, and recovery knowledge — that the pourover mechanism does not address. The legal transfer completes. The technical transfer may not.

Probate Authority and Its Operational Limits

Probate validates wills, establishes executor authority, and supervises asset distribution. For most assets, the executor presents court documents to an institution, and the institution complies. The probate authority limits for self-custody assets trace what happens when an executor stands between a legal mandate and a cryptographic system that does not recognize mandates. The court has done its work. The executor has the legal power. The Bitcoin has not moved.

The executor's legal responsibilities persist regardless of technical capability. The tension documented in executor legal responsibilities and access constraints describes fiduciary duties that attach to Bitcoin in the estate whether or not the executor can reach it. The executor has a duty to locate, secure, inventory, and distribute estate assets. Each of these duties assumes some level of operational access. When that access does not exist, the duties remain while the means to fulfill them do not.

The relationship between executor authority and keyholder capability creates a specific pattern when these roles reside in different people. The observations in executor authority versus keyholder capability describe what happens when the person with legal authority to direct the Bitcoin is not the person who can technically move it. The executor has the court documents. A friend of the deceased has the signing capability. These two parties have different relationships to the deceased, different interests, and different understandings of what comes next. Traditional estate administration assumes that authority and access converge. Self-custody Bitcoin separates them.

Executor access constraints surface in a different form when the executor simply cannot locate the credentials. The patterns in executor authority versus access constraints describe the question that emerges when legal power meets an empty search: the executor has authority, the estate includes Bitcoin, and the path from authority to access does not exist. In this version, there is no separate keyholder — the keys are simply missing. The legal documentation that bridges custody and ownership — if it was created at all — exists outside the estate plan itself, in the holder's personal records, and the executor may not know where those records are or what they contain.

Competing Authority and Ownership Disputes

Traditional assets sit inside institutions that maintain records of ownership. When disputes arise, the institution's records provide a starting point for resolution. Bitcoin in self-custody has no institutional record. Ownership comes down to who controls the keys. When multiple parties assert authority over the same Bitcoin, there is no institution to settle the dispute.

The authority conflict as a multi-source problem traces how different legal instruments — a will, a trust, a POA, an informal agreement — can point to different people or grant overlapping powers over the same Bitcoin. No automatic rule determines which prevails when these claims conflict. Resolution requires a court, an agreement among parties, or the person with technical access to provide an answer. Traditional estate administration encounters authority conflicts too. Bitcoin authority conflicts carry an additional dimension: whoever holds the private key can move the funds before any legal resolution occurs.

Ownership disputes present a parallel but distinct pattern. The observations in competing ownership claims describe disputes about who the Bitcoin belongs to, not just who can manage it. These disputes rest on incompatible foundations — purchase records, gift assertions, partnership agreements, or community property claims — none of which the blockchain records or adjudicates. When multiple people claim authority and no institutional record resolves the conflict, the dispute enters territory where legal processes designed for bank-held assets encounter assets that no bank holds.

Tax, Reporting, and Valuation Friction

Estate administration creates tax and reporting obligations that assume the executor can value, access, and account for assets. The stepped-up basis calculation for inherited Bitcoin requires knowing the Bitcoin's fair market value on the date of death. This valuation depends on identifying which addresses belong to the estate, confirming the holdings at those addresses, and determining the price at a specific point in time. When records are incomplete or the executor cannot verify which addresses the deceased controlled, the calculation encounters gaps that traditional assets do not present.

Beneficiary reporting obligations surface a communication barrier documented in beneficiary reporting for estate Bitcoin holdings. State law and fiduciary duty require keeping beneficiaries informed about estate assets. The executor is expected to explain what Bitcoin was found, its current status, and distribution timeline. When the executor lacks the technical knowledge to explain custody details — or cannot confirm whether the estate's Bitcoin is accessible — the reporting obligation meets an explanation gap that traditional asset administration does not encounter.

Specialized estate planning structures carry their own intersection points. The estate freeze valuation mechanics describe what happens when family limited partnerships attempt to lock a senior generation's estate value while shifting Bitcoin appreciation to junior generation members. The freeze structure assumes formation valuations, which require price determination at a point in time for an asset whose value can move significantly within hours. The guardianship and custody access patterns introduce court oversight requirements — reporting, bonding, periodic accounting — designed for assets held by institutions, applied to assets held by cryptographic keys that a minor's guardian may not understand.

Retirement account structures that hold Bitcoin introduce yet another documentation layer. The custody obligations for Roth IRA, Traditional IRA, and Solo 401k structures assume qualified custodians that maintain records, produce statements, and comply with regulatory reporting. When a checkbook IRA structure holds Bitcoin through an LLC, the documentation requirements of the retirement account and the access requirements of the custody system operate under different rules, enforced by different authorities, with different consequences for failure.

Across every instrument, the same pattern appears: legal documents create authority, but custody systems require keys. Nothing in probate, trusts, or POA automatically produces those keys, and nothing in Bitcoin custody recognizes court authority by default. The gap is structural. It can only be bridged by preparation outside both systems.

Index of Memos in This Category

The following memos document individual authority gaps, documentation boundaries, and structural mismatches between legal instruments and Bitcoin custody. Each memo examines one failure surface. Some memo titles are phrased as questions for search discoverability; the documents remain descriptive.

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