What Executor Needs to Know About Bitcoin

Essential Executor Knowledge for Bitcoin Estates

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

Foundational Technical Knowledge

Executors handling estates with bitcoin need certain knowledge to fulfill their duties effectively. Understanding what an executor needs to know about bitcoin involves distinguishing between different categories of knowledge: technical understanding of how bitcoin works, access knowledge specific to the estate's holdings, and legal knowledge about executor responsibilities. Each category serves different purposes and may be acquired through different means, and the executor who conflates these categories may over-prepare in some areas while remaining deficient in others.

The knowledge requirements for executors differ from those for active bitcoin users. A bitcoin holder needs to understand their own setup deeply enough to use it daily and maintain it over time. An executor needs to understand enough to administer an estate—a one-time task with different demands than ongoing management. The executor does not need to become a bitcoin expert; they need targeted knowledge sufficient for their specific administrative responsibilities. This targeted approach focuses learning effort where it matters most and avoids overwhelming executors with information they will never use.

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Foundational Technical Knowledge

Some baseline technical understanding enables the executor to make sense of what they encounter during estate administration. This foundational knowledge does not need to be deep—the executor is not designing custody systems or troubleshooting complex technical problems—but it needs to be sufficient to understand what custody materials are, why they matter, and how they relate to the bitcoin the estate controls. Without this foundation, the executor may not recognize significant materials, may handle sensitive items carelessly, or may misunderstand what they are being asked to do.

Understanding what bitcoin is at a basic level provides essential context for everything that follows. The executor needs to grasp that bitcoin is digital money that exists on a distributed network, that ownership means control of cryptographic keys, and that losing those keys means losing the bitcoin permanently. This understanding does not require knowing how cryptographic signatures work or how the blockchain achieves consensus—those technical depths do not affect executor duties. What matters is understanding the basic nature of the asset: digital, controlled by keys, and irreversible in its transactions.

Understanding custody models helps the executor recognize what they are dealing with. Self-custody means the deceased held keys directly without third-party involvement; exchange custody means a company held the bitcoin and can respond to legal authority; hybrid arrangements may involve multiple parties or services. Recognizing which model applies shapes the executor's approach—self-custody requires technical access while exchange custody may proceed through more familiar institutional channels. The executor who does not understand these distinctions may approach self-custody bitcoin as if it were an institutional account, leading to confusion and wasted effort.

Understanding key components helps the executor identify significant items. Seed phrases—those lists of words that look unusual and are often stored securely—enable wallet recovery and represent the most critical custody material. Hardware wallets are specialized devices for key management. Wallet software provides the interface for interacting with bitcoin. When the executor encounters these items, recognizing what they are enables appropriate handling. The seed phrase found in a safe deposit box is not a meaningless word list; it is potentially the key to significant value.

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Estate-Specific Access Knowledge

Beyond general technical understanding, the executor needs specific information about this particular estate's bitcoin arrangements. Access knowledge is inherently estate-specific—it cannot be learned from general education because it pertains to the deceased's particular setup. This knowledge includes what holdings exist, where custody materials are located, how to access them, and what procedures apply to recovery and use. The deceased's documentation, if it exists, should provide this knowledge; if documentation is absent, the executor must reconstruct what they can from available evidence.

Inventory knowledge identifies what bitcoin the estate includes. How much bitcoin, in what custody arrangements, on what wallets or with what services—this information defines the scope of the executor's bitcoin-related responsibilities. Complete inventory enables comprehensive administration; incomplete inventory risks overlooking holdings that should be included in the estate. The executor may find inventory documentation prepared by the deceased, may assemble inventory from discovered materials and records, or may struggle to establish inventory in the absence of helpful documentation.

Location knowledge enables finding the physical and digital materials needed for access. Where are the seed phrase backups stored? Where is the hardware wallet? What accounts exist and how are credentials stored? Location knowledge is highly specific—"in the home safe" only helps if the executor knows where the safe is and how to open it. Documentation that assumes context the executor lacks may fail to convey locations effectively. The most common access failures involve location gaps: the executor knows materials exist but cannot find them.

Procedural knowledge explains how to accomplish specific tasks with the materials found. Recovery procedures restore wallet access from seed phrase backups; transaction procedures move bitcoin; security procedures protect holdings during administration. Procedural documentation translates technical operations into step-by-step instructions the executor can follow. The executor who has materials but lacks procedural guidance faces a learning curve that good documentation would eliminate. The quality and clarity of procedural documentation directly affects executor effectiveness.

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Legal Knowledge

Executors have legal duties that apply to bitcoin as they apply to other estate assets. Legal knowledge encompasses understanding fiduciary responsibilities, tax obligations, compliance requirements, and the relationship between legal authority and practical access. While executors need not be lawyers, they need enough legal understanding to recognize when they face legal questions and to act within the bounds of their authority. Legal errors can expose executors to personal liability, making legal knowledge particularly consequential.

Fiduciary duty understanding shapes executor behavior throughout administration. The executor owes duties of loyalty, care, and prudent management to the estate and its beneficiaries. These duties apply to bitcoin—the executor must protect bitcoin value, manage it prudently, and avoid self-dealing or favoritism among beneficiaries. Understanding fiduciary duties helps executors recognize when proposed actions might breach those duties and when to seek legal guidance. Bitcoin's unfamiliarity to many executors increases the risk of inadvertent fiduciary breaches through actions that seem reasonable but prove problematic.

Tax obligation understanding informs compliance and planning decisions. Bitcoin holdings have estate tax implications; transactions during administration may have income tax consequences; distributions to beneficiaries affect their tax positions. The executor needs enough tax understanding to recognize these issues and engage appropriate professional help. Complete ignorance of tax considerations risks missed obligations, incorrect filings, or planning failures that cost the estate or beneficiaries money. The executor need not prepare tax returns personally but must ensure tax obligations are identified and addressed.

Authority boundary understanding clarifies what the executor can and cannot do. Legal authority from court appointment or will provisions enables the executor to act, but that authority has limits. Understanding where authority extends and where it ends prevents overreach that could create legal problems. This understanding also helps the executor recognize when their authority may not translate to practical capability—having legal authority to access bitcoin accomplishes nothing without the technical ability to do so.

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Knowledge Gaps and Professional Assistance

No executor arrives with complete knowledge across technical, access, and legal domains. Knowledge gaps are normal and expected; what matters is recognizing gaps and addressing them appropriately. The executor who acknowledges their limitations and seeks help demonstrates prudence, while the executor who plunges ahead despite ignorance demonstrates the opposite. Professional assistance can fill knowledge gaps that the executor cannot fill alone, though engaging professionals requires knowing what help is needed and where to find it.

Technical knowledge gaps may be filled by cryptocurrency consultants or technical specialists. When the executor lacks understanding to accomplish necessary tasks, professionals who do understand can provide guidance, assistance, or hands-on help. The cost of professional technical assistance is typically justified by the value it protects or enables access to. The executor who struggles for weeks with tasks a specialist could handle in hours serves the estate poorly through misplaced self-reliance.

Legal knowledge gaps call for attorney involvement. Estate attorneys handle probate, tax attorneys address tax questions, and some attorneys specialize in cryptocurrency legal issues. The executor who recognizes legal questions should involve appropriate legal counsel rather than attempting to resolve legal matters through guesswork. Legal errors can be costly and may expose the executor personally, making professional legal guidance particularly valuable for protecting both the estate and the executor.

Recognizing the boundaries of self-help constitutes important knowledge itself. The executor who knows when they are out of their depth—and acts on that recognition by seeking help—performs better than the executor who lacks that self-awareness. Documentation left by the deceased can help by identifying professionals who are already familiar with the situation, reducing the effort needed to bring new advisors up to speed.

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Knowledge Acquisition Timing

When the executor acquires needed knowledge affects how well they can perform their duties. Knowledge acquired proactively before death serves better than knowledge acquired reactively after death, but many executors receive no preparation and must learn everything during administration. The timing of knowledge acquisition shapes the executor's experience and effectiveness, with early preparation producing advantages that later learning cannot fully replicate.

Pre-death preparation enables learning while the holder can assist. The executor who learns about the estate's bitcoin during the holder's lifetime can ask questions, observe demonstrations, receive hands-on training, and develop familiarity through interaction with someone who knows the setup intimately. This preparation opportunity exists only while the holder is alive and willing to share; once the holder dies, the opportunity for direct learning from them closes permanently. Holders who prepare their executors create advantages that documentation alone cannot provide.

Post-death learning happens under pressure and without the holder's help. The executor who must learn everything after death faces time constraints, emotional stress, competing demands, and the impossibility of asking the deceased for clarification. Documentation serves as a partial substitute for the holder's presence, but documentation cannot answer questions it did not anticipate or explain things it assumed were obvious. Post-death learning is harder, slower, and more prone to error than pre-death preparation.

Ongoing learning continues throughout administration as new situations arise. Even well-prepared executors encounter surprises, ambiguities, and challenges they did not anticipate. The ability to learn as administration proceeds—to seek help when stuck, to research unfamiliar issues, to adapt when initial approaches fail—remains important regardless of how much preparation occurred beforehand. The executor's learning journey does not end with initial preparation but continues until administration completes.

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Minimum Viable Knowledge

Given the breadth of potential executor knowledge, identifying minimum viable knowledge helps focus learning on what matters most. The executor need not understand everything; they need enough to get started, to recognize when they need help, and to avoid costly mistakes. This minimum threshold depends on the complexity of the estate's bitcoin holdings and the resources available for professional assistance—simple estates with professional support require less executor knowledge than complex estates without professional support.

At minimum, the executor needs to understand that bitcoin requires technical access distinct from legal authority. This fundamental understanding prevents the executor from assuming that letters testamentary will unlock bitcoin the way they unlock bank accounts. Without this understanding, the executor may waste effort pursuing institutional approaches that do not apply to self-custody bitcoin, eventually arriving at frustration and confusion rather than access.

At minimum, the executor needs to know where to look for custody information and how to recognize significant materials when found. Even if the executor cannot use these materials themselves, knowing where they are and that they matter enables preservation and later use with professional assistance. The executor who discards unrecognized materials or fails to search appropriate locations may permanently destroy the estate's ability to access its bitcoin.

At minimum, the executor needs to recognize when professional help is needed and where to seek it. The executor who lacks technical capability but knows how to engage technical assistance can succeed. The executor who lacks technical capability and lacks the awareness to seek help will fail. Knowing the limits of one's own knowledge represents essential knowledge itself.

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Summary

Understanding what an executor needs to know about bitcoin involves recognizing three distinct knowledge categories: foundational technical knowledge about how bitcoin works, estate-specific access knowledge about this particular estate's holdings, and legal knowledge about executor duties and authority. Each category serves different purposes, may be acquired through different means, and poses different risks when deficient. The executor does not need comprehensive expertise across all categories but needs sufficient knowledge to perform their duties and to recognize when they need help.

Foundational technical knowledge enables the executor to understand what custody materials are and why they matter. Estate-specific access knowledge enables finding and using those materials. Legal knowledge ensures the executor acts within appropriate bounds. Knowledge gaps across any category can be addressed through professional assistance when the executor recognizes their limitations and seeks appropriate help.

Knowledge acquisition timing affects executor effectiveness, with pre-death preparation creating advantages that post-death learning cannot replicate. Minimum viable knowledge focuses learning on what matters most: understanding that bitcoin requires technical access, knowing where custody information can be found, and recognizing when professional help is needed. The holder who ensures their executor has this minimum knowledge creates conditions for successful administration that estates without executor preparation often lack.

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System Context

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Multisig Executor Coordination

Bitcoin Estate Beneficiary Reporting

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