How Bitcoin Typically Appears During Estate Administration

How Bitcoin Appears During Estate Administration

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

Discovery Often Happens Late

An estate is being administered. Alongside bank accounts, real estate, and traditional investments, there is Bitcoin. The administration involves identifying, valuing, securing, and distributing assets under fiduciary authority.

This memo describes the typical phases that estates encounter when Bitcoin is part of the asset base. It maps how discovery, valuation, access, and distribution tend to unfold—not as a checklist, but as a description of recurring patterns observed during administration.

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Discovery Often Happens Late

Traditional assets announce themselves. Bank statements arrive in the mail. Brokerage accounts send quarterly reports. Real estate has deeds on file. These assets create paper trails that executors find early in administration.

Bitcoin does not announce itself. There is no institution sending statements. There is no registry of ownership. If the deceased did not explicitly document their holdings, Bitcoin may not surface until well into the administration process—or may never surface at all.

An executor completes the initial inventory of the estate. Bank accounts are identified. Investment accounts are located. The estate appears fully mapped. Three months later, while cleaning out a home office, the executor finds a hardware wallet in a drawer. The inventory was incomplete. Bitcoin existed all along but was invisible until physically discovered.

Late discovery disrupts administration. Inventories filed with courts may need amendment. Tax calculations may need revision. Distribution plans may need adjustment. The later Bitcoin appears, the more work must be redone.

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Discovery Does Not Mean Access

Finding evidence that Bitcoin exists is different from being able to access it. Discovery establishes that the asset is part of the estate. Access determines whether the asset can be controlled.

An executor finds an exchange account confirmation email from years ago. This confirms the deceased had an account. It does not provide the password, the two-factor authentication codes, or any means of logging in. The asset is discovered but not accessed.

A hardware wallet is located. This confirms Bitcoin custody existed. It does not provide the PIN to unlock the device or the seed phrase to restore the wallet elsewhere. The asset is discovered but not accessed.

Estate administration often proceeds through a gap between these two states. The executor knows Bitcoin exists—it appears on the inventory, it must be reported to the court, it factors into tax calculations—but cannot actually touch it. Administration continues around an asset that is visible but immobile.

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Valuation Introduces Timing Problems

Estates require valuation. Assets must be assigned a dollar value for inventory, tax, and distribution purposes. For most assets, this is straightforward: a bank account has a balance, a stock has a market price, real estate can be appraised.

Bitcoin has a market price too, but that price changes constantly. The value on the date of death may differ significantly from the value when the inventory is filed, when taxes are calculated, or when distribution occurs.

An executor files an inventory valuing Bitcoin at $50,000, the price on the date of death. By the time the estate is ready to distribute, six months later, the price has risen to $80,000. Or fallen to $30,000. The value reported and the value distributed are different numbers, and the gap creates complexity for accounting, taxation, and beneficiary expectations.

When Bitcoin cannot be accessed, valuation becomes even stranger. The executor may know an address holds a certain amount of Bitcoin—this can be verified on the public blockchain—but cannot move it. The estate contains an asset with a known quantity and a fluctuating value that no one can touch. Valuation continues while access remains frozen.

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Access Questions Block Everything Downstream

Estate administration has a natural sequence. Assets are identified, then secured, then valued, then managed, then distributed. Each phase depends on the previous one. When access is blocked, everything downstream stalls.

If Bitcoin cannot be accessed, it cannot be secured in the traditional sense—moved to an estate account, placed under fiduciary control. It cannot be sold to pay debts or taxes. It cannot be distributed to beneficiaries. The administration process reaches the access question and stops.

Other aspects of the estate may proceed. Bank accounts can be closed, real estate can be sold, debts can be paid from accessible funds. But the Bitcoin sits apart, unresolved. The estate cannot fully close until every asset is accounted for and distributed. Inaccessible Bitcoin holds the estate open.

An executor completes administration of all traditional assets within eight months. The Bitcoin remains inaccessible. The estate cannot close. A year passes. Two years. The executor continues attempting to locate access credentials. The estate remains open, waiting for resolution that may never come.

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Information Surfaces Out of Sequence

In an orderly administration, information arrives in a logical order: first you learn an asset exists, then you learn where it is held, then you gain access, then you manage and distribute it. Bitcoin rarely follows this sequence.

An executor might find a seed phrase before finding the wallet it corresponds to. They might find a hardware wallet before learning what assets it holds. They might gain access to an exchange account and find it empty, only to later discover funds were moved to a personal wallet they have not yet located.

A son discovers his father's seed phrase written on a card in a safe. He does not know what it goes to. He does not know how much Bitcoin his father had. He restores the wallet and finds a balance—but is this all the Bitcoin, or just some of it? Are there other wallets? Other seed phrases? He has access to something without knowing if it is everything.

Out-of-sequence discovery creates uncertainty that persists throughout administration. The executor may never be confident the estate is fully mapped. There is no central registry to check, no institution to confirm that all assets have been found. Administration proceeds with incomplete information and no way to verify completeness.

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Partial Progress Creates False Signals

Progress on one aspect of Bitcoin administration can create the impression that the problem is solved when it is not. Partial success masks remaining obstacles.

An executor gains access to an exchange account and withdraws the Bitcoin held there. Success. But the deceased also had a hardware wallet with separate funds that remain inaccessible. The executor, having resolved one piece, may reduce effort on the other—or may report to beneficiaries that the Bitcoin has been recovered when only part of it has.

A beneficiary hears that Bitcoin was found and accessed. They expect distribution. They do not understand that what was accessed represents a fraction of the total holdings, or that other portions remain frozen. Partial progress, communicated as progress, creates expectations that cannot be met.

The staged nature of Bitcoin administration—where discovery, access, and control may resolve independently for different portions of holdings—makes it difficult to know when the process is complete. Each success may be partial, and the remaining problems may be invisible until specifically sought.

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Distribution Depends on Prior Resolution

Distribution is the final phase of estate administration: assets are transferred to beneficiaries according to the will or intestacy rules. For Bitcoin, distribution depends on every prior phase completing successfully.

The Bitcoin must be discovered—you cannot distribute what you do not know exists. It must be accessible—you cannot transfer what you cannot move. It must be valued—you need to know its worth for equitable distribution. It must be decided whether to distribute in-kind as Bitcoin or to sell and distribute cash.

A will says: "I leave my Bitcoin equally to my three children." The executor has accessed a wallet containing Bitcoin. To distribute equally, the executor must either split the Bitcoin into three portions and transfer each to a beneficiary's wallet, or sell the Bitcoin and distribute the cash proceeds. Each option has implications—tax consequences, beneficiary preferences, market timing—that must be resolved before distribution can occur.

If beneficiaries do not have Bitcoin wallets and do not want to create them, in-kind distribution becomes impractical. If beneficiaries want Bitcoin but disagree on timing for a sale, distribution stalls. If some Bitcoin is accessible and some is not, partial distribution may occur while the remainder waits indefinitely.

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Administration May Never Complete

Traditional estates eventually close. Assets are gathered, debts are paid, distributions are made, and the estate is settled. The process has an endpoint.

Estates containing inaccessible Bitcoin may not reach this endpoint. The asset exists. It must be reported. But it cannot be distributed. The estate remains administratively open, potentially for years, waiting for access that may never materialize.

Some jurisdictions allow estates to close with assets reserved or set aside. Some allow disclaimers of inaccessible property. The legal mechanisms vary. But the underlying reality persists: an asset that cannot be accessed cannot be fully administered. The estate may reach a state of indefinite suspension rather than closure.

An executor spends three years attempting to recover access to Bitcoin. Every avenue is exhausted. The estate closes with a notation that certain digital assets could not be recovered. The Bitcoin still exists on the blockchain, assigned to addresses that no one can sign for. It is simultaneously part of the estate's history and beyond its reach.

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The Phases Do Not Follow a Fixed Order

Estate administration traditionally follows a sequence: gather information, secure assets, pay debts, distribute remainder. Bitcoin disrupts this sequence because its phases—discovery, access, valuation, management, distribution—may occur in any order, may stall independently, and may never complete.

Discovery may happen early or late. Access may come before or after valuation. Distribution may be possible for some holdings and impossible for others. The clean phases of traditional administration fragment into a messier reality where progress is uneven and completion is uncertain.

An executor might distribute accessible Bitcoin to beneficiaries while still searching for other wallets. They might file tax returns based on estimated values while access remains blocked. They might close portions of the estate while others remain suspended. The administration adapts to what is possible rather than following a predetermined path.

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Conclusion

Estate administration involving Bitcoin unfolds through phases that do not follow the orderly sequence of traditional asset administration. Discovery often happens late. Access may never happen. Valuation fluctuates throughout the process. Information surfaces out of sequence. Partial progress can mask unresolved problems.

The result is administration as staged exposure to constraints rather than a linear path to closure. Each phase may stall independently. Completion is not guaranteed by progress. Estates may reach indefinite suspension rather than settlement when access remains blocked.

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System Context

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Bitcoin Estate Freeze Technique

Bitcoin Discovery Motion Limits

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