Cosigner Dies During Delay as Cascading Dependency Failure

Cascading Failure When a Cosigner Dies

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

Multi-Signature Dependencies

A bitcoin holder dies, leaving assets in a multi-signature arrangement that requires cooperation from other keyholders. Before the estate can act, one of those required cosigners also dies. The scenario where a cosigner dies during delay transforms a manageable estate situation into a compounded crisis. Two estates now interlock, each needing the other's cooperation while both face their own administrative processes.

This assessment considers how sequential deaths create cascading failure in custody arrangements. Multi-signature setups distribute risk across multiple parties, but that distribution assumes those parties remain available. When delay allows additional deaths to occur, the dependency structure that provided security becomes the mechanism of failure.

---

Multi-Signature Dependencies

Multi-signature arrangements require a threshold of signers to authorize transactions. A two-of-three setup needs two of three possible signers. Loss of one signer still permits transactions through the remaining two. Loss of two signers locks the funds regardless of how legitimate the remaining party's need might be.

These arrangements implicitly assume sufficient signers will be available when needed. The math of thresholds provides tolerance for some unavailability. But tolerance has limits. Each additional unavailable signer moves closer to the threshold where access becomes impossible.

Cosigners are often chosen from overlapping circles. Family members sign together. Business partners share custody arrangements. People of similar ages and circumstances participate in the same setups. This overlap means that risks affecting one signer may affect others—illness that runs in families, accidents that strike friend groups, or simply the statistical reality that people of similar ages face similar mortality timelines.

Death of the primary holder removes one signer and triggers the process of attempting access. If that process encounters delay, every additional signer remains exposed to their own mortality during the delay period. The longer the delay, the more opportunity for another death to occur.

---

How Sequential Deaths Occur

Shared events can claim multiple lives. A car accident, natural disaster, or illness may affect people who were together. Spouses who are both signers may die in the same incident or in close succession. The same event that creates the need for custody recovery may also remove people necessary for that recovery.

Extended delay increases exposure to independent deaths. Even unrelated causes can claim a cosigner during a lengthy probate process. A twelve-month probate means twelve months during which any cosigner might experience their own health crisis, accident, or unexpected death. Probability accumulates with time.

Grief and stress affect health. Cosigners who were close to the deceased may experience health consequences from the loss. The period following a death sees elevated mortality risk for surviving spouses and close family members. The delay period coincides with heightened vulnerability for those who remain.

Age correlations increase risk. Cosigners often come from the same generation—siblings, spouses, longtime friends. People of similar ages face similar age-related health risks. A setup involving three people in their seventies has different compound mortality exposure than one involving three people in their thirties.

---

The Cascade Effect

First death triggers administrative process. The primary holder's estate begins probate. Access requires gathering surviving signers. This is the expected scenario that multi-signature arrangements are designed to handle.

Second death transforms the situation. Now two estates exist where one existed before. The cosigner's keys become assets in their own estate, subject to their own probate process. Accessing those keys requires completing that second probate, which has its own timeline.

Parallel probate processes may not coordinate. Each estate has its own executor, its own court, its own schedule. The first estate cannot compel the second estate to prioritize bitcoin access. Jurisdictions may differ. Timelines may not align. What should be a single recovery process becomes two independent processes that must somehow mesh.

Heirs of the cosigner may not understand their role. They inherit a key to someone else's bitcoin. They may not know what it is for. They may not care about helping with a stranger's estate. The relationship that motivated the original cosigner's participation does not transfer to their heirs.

---

Legal Complications of Interlocking Estates

Each estate has its own beneficiaries with their own interests. The primary holder's heirs want access to the bitcoin. The cosigner's heirs may have no stake in that outcome. Asking them to provide signatures serves someone else's benefit, not their own. Their cooperation is a favor, not an obligation.

Fiduciary duties may conflict. The cosigner's executor has duties to the cosigner's estate. Using estate assets—including the key—to benefit a different estate may raise questions. Is the executor permitted to sign? Do beneficiaries need to consent? These questions do not have obvious answers when the custody arrangement was never contemplated by estate planning documents.

Disputes in either estate affect both. A contested will in the cosigner's estate delays access to their key regardless of how smoothly the primary estate is proceeding. Family conflict among the cosigner's heirs can block cooperation even when the primary holder's heirs are aligned and ready.

Legal counsel may advise caution. An executor advised not to take actions that could create liability may hesitate to sign transactions for another estate's benefit. The conservative legal advice that protects the cosigner's estate may trap the primary holder's bitcoin.

---

Threshold Erosion

Each death erodes the available signer pool. A three-of-five arrangement losing two signers becomes effectively three-of-three—everyone remaining must participate. The redundancy that made the original setup resilient has been consumed.

Further erosion becomes more likely with less margin. Once the pool has shrunk to exactly the threshold, any additional unavailability locks the funds. The arrangement that started with tolerance for failure now has none.

Unavailability short of death also matters during delay. A signer who becomes incapacitated, uncooperative, or unreachable reduces the effective pool without dying. Cascading problems need not all be deaths—any form of removal from participation counts against the threshold.

Arrangements designed for permanent situations become fragile under temporary stress. The two-of-three setup assumed long-term stability. During the concentrated stress of estate administration, multiple signers face elevated risk simultaneously. The arrangement was not designed for this concentrated exposure.

---

Scenarios of Cascading Failure

A married couple establishes a two-of-three multi-signature arrangement with themselves and their adult child. One spouse dies. While probate proceeds, the surviving spouse—already elderly and grieving—passes away three months later. The adult child now needs signatures from two estates, neither of which has completed probate. The family's own bitcoin is locked in a structure designed to protect it.

Business partners hold company bitcoin in a three-of-five arrangement. One partner dies. The company delays action while navigating the partnership agreement implications. During six months of legal deliberation, a second partner dies of unrelated causes. The company now needs cooperation from two estates while also facing questions about whether the company or the deceased partners' estates own the bitcoin interests.

An elderly holder establishes multi-signature custody with siblings of similar age. The holder dies at seventy-eight. Probate extends due to estate complexity. Within eighteen months, two of the three siblings designated as cosigners have also died. The sole surviving sibling holds only one key in what was designed as a two-of-three arrangement.

A car accident claims two of three signers simultaneously. The sole survivor has their own injuries and recovery to manage. By the time they are able to engage with bitcoin recovery, they discover that they alone cannot meet the threshold. The event that created urgency also removed the capability to respond.

---

Why Delay Amplifies This Risk

Immediate action could have secured funds before the second death. If the primary estate had been able to move bitcoin quickly—within days rather than months—the cascading scenario would not have developed. Delay creates the window in which additional failures occur.

Probate is the primary source of enforced delay. Court processes do not adjust timelines for custody risk. The same procedures that apply to a house and bank accounts apply to bitcoin, regardless of the different urgency profiles these assets may have.

Internal family delays also contribute. Disagreement about how to handle the estate, difficulty locating documents, or simple procrastination all extend the period of vulnerability. Every week of delay is another week during which something can go wrong with remaining signers.

Once the cascade begins, it tends to continue. Two interlocked estates are harder to resolve than one. The complexity created by the second death extends timelines further, creating more opportunity for additional problems. Difficulty compounds difficulty.

---

Conclusion

A cosigner dies during delay creates cascading failure when sequential deaths remove multiple required participants from multi-signature arrangements. The dependency structure that distributed risk assumes signers remain available. Extended delay exposes all remaining signers to their own mortality.

Sequential deaths create interlocking estates with parallel probate processes. Legal complications multiply as each estate has its own beneficiaries, fiduciary duties, and potential disputes. Threshold erosion reduces the margin for any additional unavailability.

Delay amplifies this risk by creating windows for additional failures. Immediate action could prevent cascading problems, but probate and internal delays extend vulnerability. The multi-signature arrangement designed for security becomes the mechanism of loss when too many signers become unavailable during the recovery period.

---

System Context

Examining Bitcoin Custody Under Stress

Bitcoin Military Deployment

Bitcoin Estate Deadline Timeline Misalignment

← Return to CustodyStress