Trustee Named But No Bitcoin Access

Named Trustee Without Bitcoin Access Capability

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

What Trust Documents Create

Trusts are legal structures designed to hold and manage assets for beneficiaries. A grantor creates the trust, transfers assets into it, and names a trustee to manage those assets according to the trust's terms. When the trust includes bitcoin, the legal structure may appear complete: the trust document names the asset, assigns authority to the trustee, and specifies how the bitcoin should be managed or distributed. Yet a situation arises with disturbing frequency: trustee named but no bitcoin access. The trustee has full legal authority over bitcoin they cannot touch.

This document addresses the gap between legal appointment and technical capability that emerges when trusts hold bitcoin without corresponding arrangements for trustee access. Trust documents operate in the legal domain, creating rights, duties, and authority through language and execution formalities. Bitcoin access operates in the technical domain, requiring possession of cryptographic materials that trust documents cannot conjure into existence. When these domains remain unconnected, trustees find themselves with responsibilities they cannot discharge.

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What Trust Documents Create

Trust documents create a legal framework governing how assets are held and managed. They name initial trustees and often successor trustees who step in when the original trustee dies, becomes incapacitated, or resigns. They define trustee powers—the authority to buy, sell, hold, distribute, and otherwise manage trust assets. They establish fiduciary duties that bind the trustee to act in beneficiaries' interests according to standards the law prescribes and the document may refine.

For traditional assets, this legal framework connects smoothly to practical control. Financial institutions recognize trustees and respond to their authority. When a trustee presents trust documents to a bank or brokerage, those institutions examine the documents, verify the trustee's appointment, and then grant access to accounts held in the trust's name. The legal framework created by the trust document interfaces with third-party systems designed to work with such frameworks, producing actual control over actual assets.

Trust documents can address bitcoin by naming it among trust assets, referencing cryptocurrency or digital assets in general terms, or describing specific wallet addresses or holdings. Estate planning attorneys increasingly include such provisions as bitcoin ownership becomes more common. These provisions establish legal ownership—the bitcoin belongs to the trust—and legal authority—the trustee manages the bitcoin under the trust's terms. What the provisions cannot establish is the technical access required to actually exercise that authority over self-custody bitcoin.

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What Technical Access Requires

Moving bitcoin requires producing valid cryptographic signatures. These signatures require access to private keys, which are typically derived from seed phrases and potentially protected by passphrases. Hardware wallets may require PINs to access signing capability. Multisig arrangements may require multiple signatures from different keyholders. Each custody setup has its own specific requirements that must be met before any bitcoin can move, regardless of who has legal authority to direct that movement.

Technical access was established at the time the bitcoin custody was set up, through processes that may have had nothing to do with the trust structure. Perhaps the grantor set up custody before creating the trust, holding bitcoin personally and only later transferring it to the trust legally without changing the technical custody arrangement. Perhaps the grantor set up custody intending to arrange trustee access later but never completed that step. Perhaps the custody arrangement changed over time while the trust remained static, creating divergence between what the trust says and how the bitcoin is actually held.

When a trustee steps into their role—whether as initial trustee or successor trustee—they inherit whatever technical access situation exists at that moment. If the prior trustee or grantor shared cryptographic materials with them, they have access. If materials were stored in a location the new trustee knows about and can reach, they have access. If neither of these conditions holds, the trustee has legal authority over bitcoin that remains practically inaccessible, frozen behind technical barriers that trust documents cannot remove.

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Successor Trustee Transitions

The gap between legal authority and technical access manifests most acutely during trustee transitions. When the original trustee dies, becomes incapacitated, or resigns, successor trustees named in the trust document step into the role. The legal transition follows the trust document's terms—perhaps automatically upon certain events, perhaps requiring acceptance by the successor. Once the transition completes, the successor trustee has full legal authority over all trust assets including any bitcoin.

Technical access does not transition automatically with legal authority. The successor trustee cannot access bitcoin simply because the trust document names them and the triggering event occurred. They need the same cryptographic materials the prior trustee had, obtained through processes the trust document does not govern. If the prior trustee was also the grantor who set up custody, the materials may exist only in their possession or memory. If the prior trustee received materials from the grantor, they may have stored them in ways the successor does not know about.

Death of a trustee who was also the primary keyholder creates the most severe version of this problem. Whatever the deceased knew about accessing the bitcoin—seed phrases memorized, passphrases chosen, locations where materials were stored—may have died with them. The successor trustee inherits duties to manage bitcoin that has become inaccessible through the death that triggered their succession. The same event that created their authority destroyed the access needed to exercise it.

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Fiduciary Duties Without Means

Trustees owe fiduciary duties to beneficiaries—duties of loyalty, prudence, and care in managing trust assets. These duties attach to the trustee's role and persist regardless of whether the trustee can actually perform them. A trustee who cannot access bitcoin still owes beneficiaries a duty to preserve and manage that bitcoin. The impossibility of performance does not extinguish the duty; it creates a tension between what the trustee is supposed to do and what they are able to do.

This tension generates liability risk. Beneficiaries who do not receive bitcoin they were supposed to receive may look for someone to blame. They may question whether the trustee took appropriate steps to secure access. They may allege that the trustee should have known about the access problem and resolved it before it became critical. They may argue that the trustee's failure to act earlier caused or contributed to the loss. Whether these arguments have legal merit depends on circumstances, but the trustee faces potential claims regardless.

Trustees without access must navigate a difficult position. They have duties they cannot fulfill. They face potential liability for non-performance. They may need to document their predicament, seek legal guidance, and communicate with beneficiaries about a problem that has no obvious solution. The trust's carefully designed legal structure provides no help because the problem exists outside the legal domain entirely. Professional trustees facing this situation encounter a failure mode their training and experience may not have prepared them for.

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Institutional Versus Self-Custody Trust Holdings

When a trust holds bitcoin through a custodial institution—an exchange, a custody service, or a regulated trust company—the access problem looks different. Institutional custody includes mechanisms for trustee transitions. The institution holds the bitcoin, and the trustee's authority determines who can direct the institution. When trustees change, the institution updates its records to reflect the new authorized party. Legal authority translates into practical control because the institution mediates between them.

Self-custody trust holdings lack this institutional mediation. The trust owns the bitcoin legally, but no institution holds it practically. The bitcoin is controlled by whoever possesses the cryptographic materials, which may or may not align with who the trust document says should control it. Legal ownership and practical control can diverge entirely, with the trust holding title to bitcoin that no authorized trustee can actually reach.

Some grantors choose self-custody for their trust's bitcoin deliberately, wanting to avoid institutional risks and maintain direct control. Others may hold bitcoin in self-custody personally and transfer it to their trust legally without thinking through how the trustee will access it. In either case, the choice to use self-custody creates the potential for the authority-access gap to emerge during trustee transitions or triggering events. The flexibility and independence that make self-custody attractive in normal operation become sources of vulnerability when circumstances change.

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Scenarios of Trustee Impotence

Consider a family trust created to hold various assets including bitcoin. The grantor serves as initial trustee and manages everything themselves, including the bitcoin through a hardware wallet. The trust document names the grantor's adult child as successor trustee. When the grantor dies, the child becomes trustee and discovers they have no idea how to access the bitcoin. A hardware wallet exists among the grantor's belongings, but the PIN is unknown. A seed phrase backup may exist, but its location was never disclosed. The child has inherited legal responsibility for bitcoin they cannot manage.

In another situation, a professional trustee—a bank trust department or trust company—serves as trustee of a trust holding bitcoin. The prior trustee who arranged the bitcoin custody has resigned, and the professional trustee has stepped in. The professional trustee knows how to manage traditional assets but receives no information about the bitcoin's technical custody. They learn that bitcoin exists as a trust asset from the trust document and records, but they have no seed phrase, no hardware wallet, no access credentials. Their professional standards and fiduciary duties apply to an asset they cannot touch.

A third scenario involves a trust where the grantor intended to provide access to the trustee but never completed the process. Perhaps they drafted a letter explaining where materials were stored but never delivered it. Perhaps they set up a shared custody arrangement but died before adding the trustee as a keyholder. Perhaps they assumed their trustee already knew how to access the bitcoin based on earlier conversations that were less specific than they remembered. The intention existed. The implementation did not. The trustee named but no bitcoin access situation resulted from incomplete planning rather than absent planning.

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Why Trust Planning Misses This Problem

Standard trust planning focuses on legal structures and their proper drafting. Attorneys ensure trust documents use appropriate language, comply with formalities, and achieve the grantor's legal objectives. They consider asset protection, tax efficiency, and succession planning through a legal lens. This lens has served clients well for traditional assets because legal planning addresses the actual barriers to those assets' management and transfer.

Bitcoin introduces a category of barrier that legal planning does not traditionally address. The barrier is not legal—no court ruling or document defect prevents trustee access. The barrier is technical—cryptographic requirements that exist independent of any legal framework. Attorneys trained in traditional estate planning may not recognize this barrier or may assume it will be addressed through channels outside their engagement. The grantor may not think to raise it because they assume their attorney will handle all aspects of trust planning.

Even attorneys aware of the access problem may lack the technical knowledge to solve it or the practice infrastructure to ensure it gets addressed. They can advise that access arrangements are important without knowing exactly what those arrangements look like for a particular custody setup. They can add provisions to trust documents referencing access information without knowing whether such information actually exists or where it is stored. The gap between recognizing the problem and solving it may persist even when sophisticated planning is involved.

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Summary

The situation of trustee named but no bitcoin access describes a structural gap between legal authority and technical capability. Trust documents can create comprehensive frameworks for bitcoin management, naming trustees with full legal authority and defining their powers and duties with precision. These frameworks accomplish nothing when the named trustees lack the cryptographic materials needed to actually move bitcoin held in self-custody.

Successor trustee transitions expose this gap most severely. The event that triggers succession—often death or incapacity of the prior trustee—may simultaneously eliminate the technical access that the prior trustee possessed. The new trustee inherits legal responsibility for bitcoin that has become frozen, facing fiduciary duties they cannot fulfill and potential liability they may not be able to avoid.

Trust planning that addresses only the legal dimension leaves this gap unaddressed. Legal structures and technical access are separate problems requiring separate solutions. A trust document perfectly drafted for legal purposes provides no pathway to bitcoin access if corresponding arrangements for cryptographic material transfer do not exist. The gap persists not because planning failed but because planning addressed only one of two domains that must both be addressed for trust-held bitcoin to function as intended.

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System Context

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