Executor Questions About Bitcoin

Common Executor Questions About Bitcoin Access

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

Existence and Amount

When someone dies owning bitcoin, an executor inherits responsibility for administering that asset as part of the estate. Most executors have never dealt with bitcoin before. They face an asset class that does not behave like bank accounts, real estate, or securities—the categories of property their experience may have prepared them to handle. Executor questions about bitcoin emerge from this unfamiliar terrain: basic questions about what bitcoin is, practical questions about how to access it, and fiduciary questions about how to properly account for and distribute it.

This assessment considers the questions executors ask and what those questions reveal about the information that must exist for estate administration to proceed. Each question left unanswered creates an obstacle. Each answer that depends on knowledge the deceased took with them represents a gap that the executor may or may not be able to fill. The questions are not hostile—they are the inevitable inquiries of someone who must fulfill duties they did not ask for regarding an asset they do not understand.

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Existence and Amount

First questions address the most basic facts: Does bitcoin exist? How much? Where? Executors searching through a deceased person's records may find hints—references in emails, entries on tax returns, hardware devices among belongings—without finding clear answers. Unlike bank accounts that generate statements mailed to known addresses, bitcoin holdings may leave no regular paper trail. The executor must piece together evidence of existence from fragments that may be incomplete or misleading.

Determining amount proves surprisingly difficult for self-custody bitcoin. No institution holds records the executor can request. The blockchain is public, but knowing that bitcoin exists somewhere differs from knowing which addresses belong to the deceased. A hardware wallet in the desk drawer might hold the entire holding or might be a decoy or outdated device. Tax records may show cost basis for purchases but not current holdings if sales or transfers occurred. The executor often cannot determine what they are administering without access to the actual custody materials.

Distinguishing between "the deceased had bitcoin" and "the deceased still has bitcoin" requires care. Past ownership documented in purchase records does not prove current ownership; the bitcoin may have been sold, spent, lost, or given away. Conversely, absence of records does not prove absence of holdings; the deceased may have been private about their bitcoin and left minimal documentation. Executors learn quickly that with bitcoin, the usual documentary shortcuts for identifying assets do not work reliably.

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Access and Control

Having established that bitcoin likely exists, executors next ask how to access it. What is needed to move it? Where are those things? The answers require concepts—seed phrases, passphrases, hardware wallets, private keys—that may be entirely unfamiliar. Understanding that a series of twenty-four words controls an asset worth substantial money stretches the intuitions of people accustomed to institutional assets protected by account numbers and passwords but ultimately controlled by the institutions themselves.

Searching for access materials generates questions about what to look for. What does a seed phrase look like? Where might it be stored? Could it be hidden in something that does not obviously contain it? The executor must learn enough about bitcoin custody to recognize access materials when encountered, which requires education that may not be available from their usual professional resources. An estate attorney can advise on probate procedure but may know nothing about recognizing a metal seed phrase backup.

Questions about physical versus digital access add complexity. Can bitcoin be accessed from a device that requires a PIN no one knows? What happens if the device is damaged or the battery is dead? If the device is lost, can access be recovered through other means? Each question reveals dependencies in the custody arrangement that may or may not have solutions, and the executor has no way to know which category applies without either finding documentation or hiring specialized help.

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Valuation and Accounting

Fiduciary duties require executors to inventory and value estate assets. With bitcoin, questions arise about which date's value applies, how to document that value defensibly, and what to do when the value changes substantially during administration. A volatile asset creates accounting challenges that stable assets do not. The executor who determines a value on one date may face questions about why they did not sell sooner—or later—when the price had moved significantly by the time of distribution.

Tax reporting obligations generate their own questions. What was the cost basis of the bitcoin? When was it acquired? Were there any taxable events during the deceased's lifetime that affect the estate's basis? These questions require historical records the deceased may or may not have maintained. Without purchase records, the executor may need to reconstruct basis from exchange accounts, bank records, or other fragmentary evidence—a time-consuming process that may not produce defensible answers.

Professional standards for documenting bitcoin holdings are still developing. How should the estate inventory list describe bitcoin? What records demonstrate that the executor properly safeguarded it during administration? How should distribution be documented? These procedural questions have answers that may vary by jurisdiction, by the professionals advising the executor, and by the specific circumstances of the estate. Executors operating without established precedent must make judgment calls that could later be questioned.

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Security During Administration

Executors bear responsibility for protecting estate assets during administration—a duty that takes unusual form with bitcoin. Questions arise about how to secure an asset they may not fully understand. Is leaving it where it is safe enough? Should it be moved somewhere else? Who should know about it and who should not? Every decision carries potential consequences, and the executor lacks the baseline familiarity that would inform similar decisions about bank accounts or real estate.

Involving others in bitcoin administration creates its own risks. Hiring help exposes the executor to potential theft by those who now know the bitcoin exists and may have access to custody materials. Not hiring help risks mishandling the asset through ignorance. The executor must evaluate the trustworthiness of anyone they involve—attorneys, accountants, bitcoin specialists—while having no expertise to evaluate their competence or honesty regarding an unfamiliar asset class.

Questions about the deceased's existing security arrangements add another layer. Did they have reasons for the choices they made? Would changing those arrangements compromise security in ways the executor does not understand? The executor who moves bitcoin from the deceased's custody arrangement to something the executor finds more comfortable may inadvertently increase risk rather than reduce it. Yet leaving arrangements unchanged requires trusting that the deceased's setup remains appropriate even without understanding why they chose it.

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Distribution Challenges

When the estate is ready for distribution, bitcoin creates questions that do not arise with traditional assets. Should it be distributed in-kind or sold and distributed as cash? If in-kind, how does the executor actually transfer bitcoin to beneficiaries? Do beneficiaries know how to receive and hold it? What happens if a beneficiary loses access to bitcoin the executor gave them—is that the executor's problem?

Beneficiary readiness varies enormously. Some may be comfortable receiving bitcoin directly; others may have no idea how to handle it and would prefer the executor liquidate it on their behalf. Determining beneficiary preferences requires communication that may be complicated by family dynamics, and the executor must balance honoring those preferences against their duty to distribute assets prudently. A beneficiary who demands bitcoin and then loses it may blame the executor regardless of whether blame is warranted.

Documenting distribution creates another set of questions. What proof should the executor retain showing that bitcoin was distributed to each beneficiary? A blockchain transaction provides cryptographic proof, but that proof may mean nothing to a court unfamiliar with blockchain records. How should the distribution receipt be structured? What if a beneficiary later claims they never received what the executor says they sent? The executor must create documentation that will survive potential challenge from parties who may not understand the technology involved.

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Questions That Cannot Be Answered

Some executor questions have no available answers because the necessary information died with the deceased. What was the passphrase? The deceased knew; no one else does. Where is the second backup? The deceased stored it somewhere; that location was never disclosed. Who helped set this up? The deceased worked with someone; that person's identity was never recorded. Each unanswerable question marks a point where estate administration may become impossible, not because the executor fails to try, but because required information simply does not exist in accessible form.

Executors confronting unanswerable questions must decide how long to search before concluding that the information cannot be found. Every hour spent searching for a passphrase that may not exist anywhere is an hour that could have been spent on other estate matters. Every dollar paid to specialists attempting recovery is a dollar that may not be recoverable from the estate if recovery fails. The executor must make judgment calls about when to abandon efforts without knowing whether success was just around the corner.

The emotional dimension compounds the practical difficulty. Family members may insist that the bitcoin must be recoverable, that the deceased would not have left things inaccessible. They may pressure the executor to keep trying long past the point of reasonable effort. They may blame the executor for failure that is actually the result of the deceased's incomplete planning. The executor absorbs frustration generated by circumstances they did not create and cannot control.

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The Questions as Diagnostics

Each question an executor asks represents information that must exist somewhere for administration to succeed. The totality of executor questions about bitcoin maps onto the information the deceased would have needed to leave behind: documentation of existence and amount, access materials and instructions, cost basis records, security protocols, and distribution guidance. Where the deceased provided this information, executor questions have answers. Where they did not, executor questions expose gaps.

Viewed from the holder's lifetime perspective, executor questions serve as a diagnostic for custody planning. If the holder imagines their executor asking each of these questions after their death, they can evaluate whether answers would be available. "How much bitcoin do I have?" maps to whether clear records exist. "How do I access it?" maps to whether instructions and materials have been prepared. "What was the cost basis?" maps to whether purchase records have been maintained. The questions predict what will be needed before the need arises.

This diagnostic perspective reveals that most holders have not prepared for the questions their executors will actually ask. They may have focused on access to the exclusion of accounting, or on security to the exclusion of documentation, or on their own convenience to the exclusion of anyone else's comprehension. The full scope of executor questions extends beyond any single dimension of custody and illuminates what comprehensive preparation would require.

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Assessment

Executor questions about bitcoin emerge from the collision between fiduciary duty and unfamiliar technology. Executors must inventory, value, protect, and distribute an asset they may never have encountered before, using information the deceased may or may not have left behind. Their questions address existence, access, valuation, security, and distribution—each dimension requiring information that cannot be obtained from institutions and may not exist anywhere if the deceased did not create it.

Unanswerable questions mark points where estate administration may fail not because the executor lacks diligence but because necessary information does not exist in accessible form. Passphrases known only to the deceased, backup locations never disclosed, and cost basis records never maintained create gaps that effort alone cannot fill.

The questions executors inevitably ask serve as a map of what holders would need to document and prepare for their estates to be administrable. Imagining these questions during one's lifetime reveals whether answers would be available after death. Where answers would not be available, the questions illuminate gaps in custody planning that could leave executors unable to fulfill their duties regarding bitcoin that technically belongs to the estate but practically cannot be accessed or administered.

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