Bitcoin Custody Authority Conflict as a Multi-Source Problem

Overlapping Authority Claims Over Shared Holdings

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

Sources of Authority That Can Conflict

Multiple sources of authority point to different people or grant overlapping powers over the same bitcoin. A bitcoin custody authority conflict emerges when these sources cannot all be honored simultaneously. The question of who controls the asset has multiple answers that contradict each other. Resolution requires determining which authority source takes priority, but this determination may itself be contested.

This analysis covers how authority conflicts arise and why they resist easy resolution. Different legal instruments, family relationships, and informal arrangements can each claim to grant control. When these claims overlap, no automatic rule determines which prevails. The conflict persists until someone with power to resolve it—a court, an agreement among parties, or the person with technical access—provides an answer.

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Sources of Authority That Can Conflict

Estate planning documents create one source of authority. A will names an executor. A trust names a trustee. These instruments speak to who controls assets after death or during incapacity. They represent the holder's deliberate planning choices documented in legal form.

Family relationships create another source. A spouse may have community property rights. Minor children may have legal claims. Parents of a deceased person may have intestate inheritance rights. These relationships exist independently of any documents and carry their own legal weight.

Powers of attorney create authority during life. An agent may have powers that overlap with a trustee's authority if assets are held both inside and outside a trust. The POA may name a different person than the trust, creating parallel authorities over different portions of the same holdings.

Informal arrangements add another layer. The holder may have told someone they would receive the bitcoin, without documentation. They may have shared access materials with someone not named in any formal document. These arrangements lack legal formality but create expectations and sometimes capabilities that compete with documented authority.

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How Conflicts Emerge

Conflicts emerge through inconsistent planning. A holder creates a trust naming one trustee, then later signs a will naming a different executor without coordinating the documents. Both instruments are valid. Both name someone with authority. The relationship between the trust assets and estate assets may be unclear, leaving both fiduciaries claiming authority over the bitcoin.

Changes over time create conflicts. A holder names their spouse as agent under a POA, then divorces without updating the document. State law may automatically revoke the authority, or it may not depending on jurisdiction and document language. The ex-spouse may believe they retain authority while family members disagree.

Different legal theories produce different answers. Community property law may give a spouse claims to bitcoin acquired during marriage. Separate property law may exclude such claims if the bitcoin was acquired with separate funds. Both spouses may have colorable arguments based on different legal frameworks, with the truth depending on facts that are hard to establish.

Death triggers conflicts that were latent during life. While the holder lived, they could resolve ambiguity by stating their intent. After death, documents and relationships must speak for themselves. Inconsistencies that the holder managed informally become formal disputes requiring resolution.

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Priority Rules and Their Limits

Legal systems have rules for resolving some conflicts. Later documents may supersede earlier ones. Specific grants may override general ones. Certain instruments take priority over others by operation of law. These rules resolve some conflicts by providing clear answers about which authority controls.

Priority rules have limits. They work when the conflicts fall within recognized categories. A will clearly supersedes an earlier will. A trust amendment clearly modifies the original trust. But when conflicts involve different types of instruments or different legal theories, priority rules may not clearly apply.

The bitcoin-specific context adds complications. Priority rules developed for traditional assets. How they apply to self-custody bitcoin may be unclear. Does a trustee's authority over trust property include authority over the seed phrase stored outside the trust? Does an executor's authority over estate assets reach bitcoin the decedent held in a multi-signature arrangement with others? The rules provide frameworks but not always answers.

When priority rules do not clearly resolve a conflict, determination falls to courts or agreement among parties. Courts take time and cost money. Agreement requires willing parties who may not be willing. The conflict persists while resolution mechanisms grind forward.

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Technical Access Complicates Legal Conflicts

While legal authority conflicts play out, technical access remains a separate question. Someone may have the seed phrase regardless of legal disputes about who has authority. The person with technical access can move bitcoin while legal arguments continue. The legal conflict does not freeze the asset.

This creates a race dynamic. A party with both a legal claim and technical access may act quickly to secure the bitcoin. Their action may be legally correct or incorrect, but once taken, the bitcoin has moved. Other parties must then pursue recovery rather than prevention. The conflict shifts from who has authority to who has liability.

Technical access may not align with any legitimate authority. A technician who helped set up custody has access but no legal claim. A family member who stumbled upon a seed phrase has access but may not be a beneficiary. These parties could intervene in the legal conflict by moving bitcoin, adding chaos to an already confused situation.

The separation between legal authority and technical access means authority conflicts do not necessarily determine outcomes. The legal process resolves who had authority. Technical reality determines what happened. These may differ, with consequences sorted out after the fact.

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Scenarios Where Conflicts Appear

A holder dies with a trust naming their adult child as trustee and a will naming their sibling as executor. The trust was supposed to hold all assets but was never funded with the bitcoin. The trustee claims authority over the bitcoin as a trust asset that should have been transferred. The executor claims authority over the bitcoin as an estate asset that was never transferred. Both claims have merit.

A married holder becomes incapacitated. Their spouse has community property rights and a healthcare directive but not a financial POA. A business partner has a financial POA that may or may not cover personal bitcoin holdings. The spouse and business partner each claim authority to manage the bitcoin during incapacity. Their claims rest on different legal foundations.

A holder dies intestate, without a will. Multiple children are equal heirs under state law. Each has an equal claim to the estate including bitcoin. None has been appointed executor yet. All believe they have inheritance rights. Technical access may be with one child while legal rights are shared. The conflict involves both legal priority and practical control.

A holder set up a multi-signature arrangement with family members for security. They die. The will names an executor who was not part of the multi-signature setup. The family members have technical capability through their keys. The executor has legal authority but not the keys. The conflict involves both who has authority and who can actually act.

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Resolution Paths and Their Costs

Courts can resolve authority conflicts through declaratory judgments or other proceedings. Parties ask the court to determine which authority controls. The court applies legal rules to the facts and issues a ruling. This process provides definitive answers but takes time and costs money.

Agreement among claimants can resolve conflicts faster. If all parties with claims reach a settlement, they can divide authority or assets without court intervention. This path requires willingness to negotiate and ability to reach terms. Family conflicts often lack these qualities.

Default rules resolve some conflicts automatically. If one claimant never asserts their position, the other may proceed unopposed. If one claimant lacks practical ability to enforce their authority, the other may control by default. These resolutions depend on circumstances rather than legal determination.

Each resolution path has costs. Court proceedings consume resources and create records. Agreements may require concessions that parties resent. Defaults may leave underlying questions unanswered, creating risk of later challenges. No resolution path is costless, and the costs compound the longer the conflict persists.

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The Holder's Role in Prevention

Authority conflicts often trace to the holder's own actions or inactions. They created multiple documents without coordinating them. They changed their plans without updating all relevant parties. They made informal promises that conflicted with formal arrangements. The conflicts they left behind reflect complexity they did not simplify while alive.

Holders may not recognize the conflicts they create. Each document or arrangement seems reasonable in isolation. The attorney drafting the will does not know about the trust created by a different attorney. The family member given technical access does not know about the fiduciary named in documents. The pieces exist in silos that the holder did not integrate.

Some conflicts are deliberate, at least implicitly. The holder avoided hard choices by leaving contradictory arrangements. They hoped things would work out or that others would resolve what they did not. The conflict represents decisions they declined to make, pushed forward to survivors.

Other conflicts are genuinely unintentional. The holder changed their mind and forgot to update documents. Life circumstances changed faster than estate planning kept up. The conflict arose from human fallibility rather than avoidance. Either way, the holder is unavailable to clarify when the conflict surfaces.

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Conclusion

Bitcoin custody authority conflict arises when multiple legitimate sources grant overlapping or contradictory control over the same asset. Estate documents, family relationships, powers of attorney, and informal arrangements can each claim to grant authority. When these claims conflict, no automatic rule determines which prevails.

Priority rules resolve some conflicts but have limits, especially when applied to self-custody bitcoin. Technical access operates separately from legal authority, allowing movement of bitcoin while legal disputes continue. The separation between authority and access means legal resolution does not necessarily determine practical outcomes.

Resolution requires courts, agreement among parties, or default based on who acts and who does not. Each path has costs. The conflicts often trace to the holder's uncoordinated planning, leaving survivors to resolve what the holder did not address while they could.

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System Context

Examining Bitcoin Custody Under Stress

Trustee Named But No Bitcoin Access

Bitcoin Trustee Removal Procedure

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