Bitcoin Incapacity Planning

Planning for Incapacity Before It Occurs

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

Incapacity Versus Death

The Bitcoin holder is alive. They are in a hospital bed, or a care facility, or at home with a condition that prevents them from acting. They cannot type. They cannot remember. They cannot explain. They cannot authorize. The person exists. The ability to operate their custody system does not.

Bitcoin incapacity planning examines what happens to a custody system when the holder is alive but unable to act, explain, or authorize access. This is different from death. The person has not died. Their legal personhood continues. But their operational capacity—the ability to use their own system—has stopped.

The assessment becomes relevant during medical events, cognitive decline, injury, prolonged unconsciousness, or any situation where the holder cannot reliably participate in their own custody. Someone needs access. The holder cannot provide it. The question is whether the system allows anyone else to proceed.

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Incapacity Versus Death

Custody systems are often designed around two states: fully capable or deceased. The holder either controls everything themselves, or they have died and an executor takes over. This binary framing misses the middle state—incapacity—where the holder is alive but cannot act.

Death triggers clear legal mechanisms. A will becomes operative. An executor is appointed. Authority transfers according to established procedures. The person is gone, and the system for handling their absence activates.

Incapacity does not trigger these mechanisms cleanly. The person is not dead. The will is not operative. No executor has authority. The person still legally owns their Bitcoin. They just cannot use it or explain how others might use it on their behalf.

A bitcoin incapacity scenario creates authority ambiguity that death does not. During death, authority transfers. During incapacity, authority may be unclear, contested, or delayed while the holder remains alive but non-functional.

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The Liminal State

Incapacity creates a liminal state—a threshold condition where normal rules do not apply cleanly. The holder is alive, so death-related procedures do not apply. The holder cannot act, so normal operation does not apply either. The system exists in between.

In this liminal state, questions arise that have no obvious answers. Who can access the Bitcoin? Under what authority? With whose permission? For what purposes? The answers depend on legal instruments, relationships, and circumstances that may not have been anticipated.

Bitcoin access during incapacity often requires navigating this liminal state. Someone needs to act. They may have physical access to materials. They may not have clear legal authority to use them. They may hesitate, unsure whether acting would help or create liability.

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Authority Ambiguity

Legal authority during incapacity is often ambiguous. A power of attorney may exist. It may or may not cover Bitcoin. It may or may not have been activated by the incapacity. The agent named in the document may or may not understand what they can do with it.

Power of attorney documents were designed for traditional assets. They reference bank accounts, real property, and financial instruments. Bitcoin may not fit neatly into these categories. An agent may have authority over "financial matters" but hesitate to use it for Bitcoin because the document does not mention digital assets explicitly.

Even when authority exists on paper, institutions may not recognize it. A custody service may refuse to honor a power of attorney. A bank may refuse to release a safe deposit box. The authority exists legally. The practical ability to use it may be blocked.

Bitcoin custody incapacity reveals these authority gaps. The holder cannot act. Others may have authority on paper but face friction when attempting to exercise it. The gap between legal authority and practical access becomes visible.

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A Scenario Where Incapacity Blocks Access

A woman has a stroke. She survives but cannot communicate or make decisions. She has Bitcoin stored on a hardware wallet at her home. Her husband knows about the Bitcoin. He has physical access to the device. He does not have the PIN or the seed phrase.

A power of attorney exists naming the husband as agent. He takes it to a lawyer. The lawyer says the document covers financial matters but may not clearly authorize cryptocurrency transactions. The lawyer advises caution.

The husband contacts the hardware wallet manufacturer. They explain they cannot help—they do not hold keys or have access to user funds. They suggest he find the seed phrase. He searches the house. He cannot find it. His wife cannot tell him where it is.

Medical bills arrive. Care costs mount. The Bitcoin could help pay them. The husband cannot access it. His wife is alive. She is the legal owner. She cannot act. He may have authority but cannot exercise it without credentials he does not possess. The incapacity has frozen access while obligations continue.

This scenario illustrates what bitcoin incapacity planning reveals: the gap between need, authority, and access when the holder cannot participate.

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Informal Delegation Breakdown

Many custody systems rely on informal delegation. "My spouse knows how to help." "My brother can figure it out." "If something happens to me, they will handle it." These assumptions work when the holder is available to explain, authorize, and guide.

Incapacity removes the holder from the delegation process. The spouse may know how to help but lacks the authority to act without the holder's consent. The brother may be able to figure it out but hesitates to access funds that are not legally his. The informal helpers face a situation they were not prepared for.

The holder assumed they would be available to authorize. They assumed they could answer questions. They assumed they could tell helpers where things are and what to do. Incapacity removes these assumptions. The helpers have partial knowledge but no clear path to act on it.

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Access Without Consent Risk

Helpers in an incapacity scenario face a difficult position. They may have the technical ability to access the Bitcoin. They may even have some form of legal authority. But they are acting without the holder's active consent.

This creates risk. If the holder recovers, will they approve of what was done? If other family members disagree with the helper's actions, could there be legal consequences? If the helper makes a mistake, are they liable? These questions cause hesitation.

An incapacitated bitcoin holder cannot provide real-time authorization. The helper acts in a gray zone—technically able, possibly authorized, but without the comfort of explicit consent. Many helpers choose to wait rather than act, hoping the situation will resolve itself. While they wait, access remains blocked.

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Documentation That Assumes Wrong Conditions

Custody documentation often assumes conditions that do not match incapacity. Instructions assume the holder will be present to explain. Backup procedures assume voluntary participation. Inheritance plans assume death, not incapacity.

Instructions written for inheritance may say "after I die, do X." They do not address what happens if the holder is in a coma, has dementia, or cannot communicate for other reasons. The instructions assume a binary: alive and capable, or dead. Incapacity is neither.

This documentation gap creates confusion. Family members find instructions that do not fit their situation. The instructions reference death that has not occurred. The instructions reference the holder's participation that is not possible. The documentation exists but does not address the actual conditions.

Bitcoin incapacity planning reveals where documentation assumes wrong conditions. It identifies gaps between what the documents address and what incapacity actually requires.

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Medical and Legal Delays

Incapacity often triggers delays. Medical teams focus on the patient's health, not their finances. Legal processes for establishing incapacity or activating powers of attorney take time. Courts have backlogs. Doctors are cautious about certifying capacity determinations.

During these delays, custody access may be frozen. The holder cannot act. No one else has clear authority yet. The Bitcoin sits inaccessible while medical bills accumulate, care costs mount, and financial obligations continue.

The urgency of need does not accelerate legal processes. Family members may desperately need to access funds for care. The legal system moves at its own pace. The gap between need and access can extend for weeks or months while the incapacity continues.

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Institutional Non-Cooperation

Institutions often refuse to cooperate during incapacity. A bank may not release safe deposit box contents to a power-of-attorney agent without additional verification. A custody service may require the account holder's direct authorization—which is impossible when the holder cannot communicate.

These institutions are protecting themselves. They face liability if they release assets to someone who turns out not to have proper authority. Their caution is understandable. But their caution creates access barriers for people who legitimately need to act on the holder's behalf.

The bitcoin incapacity scenario often involves institutional friction. The family has documents. The institutions want more. The family provides more. The institutions want still more. Each round of requests takes time. Each delay extends the period during which access remains blocked.

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Coordination Breakdown

Incapacity often involves multiple parties: family members, healthcare providers, attorneys, financial institutions, and possibly courts. These parties may not coordinate well. Each has their own concerns, their own processes, and their own requirements.

Family members may disagree about what to do. One sibling thinks they have authority. Another disagrees. One wants to access funds immediately. Another wants to wait for legal clarity. These disagreements can freeze action while the family argues.

Healthcare providers focus on medical decisions, not financial ones. Attorneys focus on legal compliance, not urgent access needs. Financial institutions focus on protecting themselves from liability. No one is coordinating the overall situation. Each party handles their piece while custody access falls through the gaps.

Bitcoin incapacity planning reveals coordination requirements. It shows which parties need to work together and what happens when they do not.

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Time Pressure Under Incapacity

Incapacity often creates time pressure that death does not. When someone dies, their financial obligations largely stop. When someone is incapacitated, their obligations continue—and often increase.

Medical care costs money. Long-term care costs money. Mortgages, insurance premiums, and other bills continue. The incapacitated person may have Bitcoin that could cover these costs. If that Bitcoin is inaccessible, the family faces financial strain while the asset sits unused.

This time pressure can force difficult decisions. Do family members pay out of pocket, hoping to be reimbursed later? Do they take on debt? Do they let bills go unpaid? The pressure mounts while access remains blocked. Bitcoin access during incapacity is often needed urgently, not eventually.

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Partial Recovery Complications

Incapacity is not always permanent. Some people recover. They wake from comas. They emerge from medical crises. They regain cognitive function after temporary impairment.

Partial recovery creates additional complications. Actions taken during incapacity may be questioned. The holder may not remember what they owned or where things were stored. The holder may have different preferences now than before. The holder may contest decisions made on their behalf.

Helpers who acted during incapacity face scrutiny. Did they act appropriately? Did they take more than necessary? Did they follow the holder's wishes? The holder's return does not resolve these questions—it raises new ones.

A bitcoin incapacity scenario may not end cleanly with death or full recovery. The holder may remain in a diminished state, partially capable but still unable to fully manage their own affairs. This extended liminal state can continue for years.

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What Incapacity Planning Reveals

Bitcoin incapacity planning reveals how a custody system behaves when the holder is alive but unable to act. It shows where authority gaps exist, where access is blocked, and where coordination breaks down.

The assessment reveals whether legal instruments cover Bitcoin access. It reveals whether designated helpers have both the authority and the capability to act. It reveals whether documentation addresses incapacity conditions or assumes only death.

The assessment reveals institutional friction points. It shows which third parties need to cooperate and what happens when they do not. It reveals timing constraints and the gap between urgency of need and pace of legal processes.

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What Incapacity Planning Does Not Reveal

Incapacity planning does not reveal legal adequacy. Whether a power of attorney is legally sufficient depends on jurisdiction, document language, and specific circumstances. The assessment does not provide legal conclusions.

The assessment does not predict outcomes. It models behavior under stated assumptions. Actual incapacity may involve different circumstances, different parties, and different institutional responses. The assessment describes structure, not fate.

The assessment does not reveal preparedness in any comprehensive sense. A system may fail incapacity planning while being well-prepared for death. A system may pass incapacity planning while having other gaps. Incapacity is one scenario among many.

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The Boundary of the Assessment

Bitcoin incapacity planning has boundaries. It examines custody behavior during incapacity under specific assumptions about who is incapacitated, who is available to help, and what authority instruments exist. Different assumptions would produce different results.

The assessment assumes certain legal instruments and certain relationships. Changes to these—new powers of attorney, different designated helpers, changed family dynamics—would alter the outcome.

Within its boundaries, the assessment reveals incapacity-specific gaps. Outside its boundaries, other factors dominate. Incapacity planning is one lens for examining custody survivability, not a complete picture of all possible scenarios.

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What the Result Represents

The result of bitcoin incapacity planning is a description of modeled custody behavior during incapacity under stated assumptions. It shows where authority gaps exist, where access is blocked, and where the system depends on the holder's participation that incapacity removes.

The result does not represent preparedness. A system may be well-prepared for incapacity while the assessment identifies gaps. A system may have gaps while being adequate for the specific circumstances that actually occur.

The result isolates authority and access gaps unique to incapacity scenarios. It distinguishes incapacity from death and reveals where custody systems fail to account for the liminal state between full capacity and death.

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Summary

Bitcoin incapacity planning examines custody system behavior when the holder is alive but unable to act, explain, or authorize access. Incapacity creates a liminal state distinct from death—the person has not died, but they cannot participate in their own custody.

Custody systems often assume binary states: fully capable or deceased. Incapacity falls between these states, creating authority ambiguity that death does not produce. Legal instruments may or may not clearly authorize Bitcoin access. Institutions may refuse to cooperate. Helpers may hesitate to act without explicit consent.

Documentation often assumes conditions that do not match incapacity. Medical and legal delays extend access blockages while financial obligations continue. Coordination among family members, professionals, and institutions frequently breaks down. Time pressure mounts as costs accumulate.

The assessment reveals how custody behaves during incapacity, identifying authority gaps and access barriers unique to this scenario. The result describes modeled behavior under stated assumptions, isolating where systems fail to account for the holder's living but non-functional state.

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System Context

Examining Bitcoin Custody Under Stress

What If Incapacity Happens First With Bitcoin

Explain Bitcoin Custody to Judge as Translation Between Knowledge Systems

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