Inheritance Without Instructions as a Transfer Gap

Inheritance Without Written Recovery Instructions

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

Holder Knowledge Concentrated

A person holds bitcoin. They have not created instructions for what happens to it after they die. The custody arrangement works while they are alive because they understand it. They know where things are, what the passwords are, how to access everything. This knowledge exists only in their head. If they die, the knowledge dies with them.

This memo examines how the absence of inheritance instructions creates a gap between ownership and access. The person owns the bitcoin. After their death, ownership would transfer to heirs through normal inheritance processes. But access does not automatically transfer. Without instructions, heirs may own bitcoin they cannot reach.

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Holder Knowledge Concentrated

The bitcoin holder has concentrated knowledge about their custody arrangement. They know where the hardware wallet is stored. They know where the seed phrase backup is located. They know what passphrase was used, if any. They know the PIN codes, the passwords, the sequence of steps required to access the bitcoin.

This knowledge accumulated over time. The person set up the custody arrangement. They made decisions at each step. They chose locations, created passwords, configured settings. Each choice added to their knowledge. The knowledge exists as a complete picture in their mind.

No one else has this complete picture. Perhaps a spouse knows the hardware wallet exists but not where the backup is. Perhaps a child knows bitcoin is owned but not how much or how it is stored. Perhaps no one knows anything at all. The knowledge is concentrated in the holder.

This concentration is a single point of failure for inheritance. The holder's death removes the knowledge from the world. What they knew becomes unknown. The custody arrangement that depended on their knowledge loses its operator.

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Access Dies When Holder Dies

When the holder dies, their ability to access the bitcoin ends. This is obvious. But less obviously, their ability to grant access to others also ends. The holder could have told someone how to access the bitcoin. Now they cannot. The window for sharing knowledge has closed.

The bitcoin remains where it was. The blockchain does not know the holder died. The addresses still hold the same balance. The keys still control those addresses. Nothing about the bitcoin itself has changed.

What has changed is the link between the bitcoin and any living person who can access it. The holder was that link. The holder is gone. If no one else was given the knowledge to recreate that link, the link is broken permanently.

This breaking is silent. No alert sounds. No notification appears. The bitcoin simply becomes inaccessible. It may remain on the blockchain indefinitely, owned by no one who can reach it, a digital artifact of a custody arrangement that could not outlive its creator.

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Ownership Transfers, Access Does Not

Legal ownership can transfer after death. Through wills, through intestate succession, through probate processes, the right to property passes to heirs. The bitcoin, as property, becomes legally owned by someone else.

But legal ownership of bitcoin is meaningless without access. The heir owns the bitcoin. They cannot move it, sell it, or use it without the keys. The keys do not transfer through legal processes. The keys transfer only through possession of the seed phrase or the knowledge to recreate it.

This creates the inheritance gap. Legal frameworks handle ownership transfer. They do not handle access transfer for self-custody bitcoin. The two systems do not connect. An heir can have a court order saying they own the bitcoin and still be unable to access it.

The gap cannot be closed after the holder's death if no instructions exist. Courts cannot compel the blockchain to release bitcoin. No institution can override cryptographic control. The access that the holder had cannot be reconstructed from legal documents alone.

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Scenarios That Surface the Problem

A person dies suddenly without having discussed their bitcoin with anyone. The family discovers a hardware wallet among their belongings. They do not know the PIN. They do not know if there is a backup or where it might be. They have a device they cannot use and no way to learn how to use it.

A person dies after a long illness. They meant to share their bitcoin access information but kept putting it off. They assumed they had more time. The information they were going to share never got shared. The family knows bitcoin exists but cannot access it.

A person dies and leaves a will that mentions bitcoin and names a beneficiary. The will does not explain how to access the bitcoin. The executor tries to fulfill the bequest but has no instructions. The legal transfer is clear; the practical transfer is impossible.

A person dies and the family does not even know bitcoin was owned. The bitcoin is never claimed because no one knew to look for it. Years later, someone discovers evidence of the holding. By then, any trail to access has gone completely cold.

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Knowledge as the Missing Transfer

Traditional inheritance transfers property through legal mechanisms. Real estate transfers through deeds. Bank accounts transfer through beneficiary designations or probate. These transfers work because institutions recognize the legal process and act accordingly.

Bitcoin inheritance requires transferring knowledge, not just legal rights. The heir needs to know where the seed phrase is. They need to know how to use it. They need the complete operational picture that the holder had. This knowledge must be transferred separately from the legal transfer.

The absence of inheritance instructions is the absence of this knowledge transfer mechanism. The holder planned the legal transfer or relied on default succession. They did not plan the knowledge transfer. They assumed the one would somehow include the other. It does not.

Creating inheritance instructions is creating the knowledge transfer. The instructions document what the holder knew: where things are, how they work, what steps to follow. The instructions externalize the concentrated knowledge so it can survive the holder's death.

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The Gap's Permanence

The inheritance gap, once the holder dies, is often permanent. If the knowledge is gone, it is gone. If no one knows the seed phrase and no copy exists that can be found, the bitcoin is inaccessible forever.

There is no appeals process. There is no higher authority that can grant access. The blockchain enforces its rules regardless of human circumstances. The cryptographic control that made the bitcoin secure while the holder lived makes it permanently inaccessible after they die without instructions.

This permanence distinguishes bitcoin from many other assets. A forgotten bank account can be reclaimed through identity verification. Lost stock certificates can be replaced. Misplaced deeds can be reconstructed from records. Bitcoin lost to absent inheritance instructions cannot be recovered.

The permanence makes the planning urgent. The gap can only be addressed while the holder is alive. Once they die, the opportunity is gone. The instructions that could have been created cannot be created by anyone else.

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Summary

The absence of inheritance instructions creates a gap between ownership and access. The holder's knowledge about the custody arrangement is concentrated in their mind. When they die, that knowledge dies with them unless it has been externalized in instructions.

Legal ownership can transfer to heirs through normal processes. Access does not transfer through legal processes. Heirs may legally own bitcoin they cannot reach. The legal and cryptographic systems do not connect automatically.

The inheritance gap is often permanent once the holder dies. No authority can override cryptographic control. The instructions that could have bridged the gap can only be created while the holder is alive. The absence of planning before death becomes the permanence of inaccessibility after.

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System Context

Examining Bitcoin Custody Under Stress

Is My Bitcoin Lost If I Die: Modeled Custody Behavior at Death

Bitcoin Heir Access Planning

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