What Legal Documents for Bitcoin

Legal Document Types for Bitcoin Ownership

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

Estate Planning Documents

Holders beginning to plan for bitcoin ownership encounter questions about what legal documents for bitcoin exist and what purposes each serves. The legal document landscape includes traditional estate planning instruments, cryptocurrency-specific provisions, and technical documentation that bridges legal authority and practical access. Understanding these categories helps clarify what different documents accomplish.

Legal documents alone do not enable bitcoin access—they establish legal authority and frameworks. Technical documentation must complement legal instruments for the overall system to function. The question of what legal documents apply opens into a broader question about how legal and technical layers interact.

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Estate Planning Documents

Traditional estate planning instruments apply to bitcoin as they apply to other property. These documents establish who receives assets at death and who has authority to manage the estate. They were designed for conventional assets but extend to cryptocurrency with varying degrees of specificity.

Wills direct asset distribution at death through probate. A will can mention bitcoin specifically or include it within general property categories. The will designates beneficiaries and names an executor to administer the estate. Bitcoin passing through a will goes through probate—a court-supervised process that creates public records and takes time.

Trusts hold assets during life and transfer them at death outside probate. Bitcoin placed in a trust can pass to beneficiaries without court involvement, potentially preserving privacy and reducing delays. Trust documents specify how the trustee manages assets and under what terms beneficiaries receive them.

Beneficiary designations on accounts pass assets directly to named recipients. Exchange accounts may permit beneficiary designations that transfer holdings outside probate. Self-custody bitcoin has no account to designate beneficiaries on, making this mechanism inapplicable.

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Incapacity Planning Documents

Estate documents address death. Separate documents address incapacity—what happens if the holder becomes unable to manage their affairs while still alive. Incapacity planning is particularly relevant for bitcoin, which may need active management and security maintenance during the holder's incapacity.

Powers of attorney authorize agents to act on the principal's behalf. A financial POA may grant authority over assets including bitcoin. Whether standard POA language covers cryptocurrency depends on how it is drafted and interpreted. Specific digital asset provisions can clarify authority.

Healthcare directives address medical decisions, not assets, but connect to incapacity determinations that may trigger other documents. The determination that someone lacks capacity may activate springing powers of attorney or enable trust provisions.

Revocable trusts can include incapacity provisions allowing successor trustees to take over management if the grantor becomes incapacitated. This provides continuity of asset management without requiring court-supervised guardianship or conservatorship.

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Authority and Fiduciary Documents

Some documents establish who has authority to act and under what terms. These documents do not transfer assets but create frameworks within which asset management occurs.

Trust instruments name trustees and successor trustees with authority to manage trust assets. The trust document specifies trustee powers, duties, and limitations. For bitcoin held in trust, these provisions determine what the trustee can and cannot do with the cryptocurrency.

Letters of instruction supplement formal documents with guidance for fiduciaries. These letters may explain the holder's wishes, provide context for decisions, or offer practical guidance. Letters of instruction typically are not legally binding but inform fiduciary discretion.

Guardianship designations address care of minor children rather than assets directly, but connect to asset questions when children may inherit. A guardian of the person differs from a guardian of the estate—and both may need coordination with bitcoin succession plans.

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Cryptocurrency-Specific Provisions

Standard legal documents may need cryptocurrency-specific provisions to address bitcoin's unique characteristics. These provisions can appear as standalone documents, clauses within broader documents, or addenda to existing instruments.

Digital asset definitions establish what the document covers. Definitions may include cryptocurrency specifically, refer to digital assets broadly, or use other language. Whether a particular definition includes self-custody bitcoin depends on its wording.

Custody provisions address how fiduciaries handle bitcoin. These provisions may specify custody approaches, authorize third-party custody services, or provide guidance for security practices. Without specific custody provisions, fiduciaries apply general prudence standards—which may not clearly address cryptocurrency.

Access provisions address how fiduciaries obtain the practical ability to manage bitcoin. These provisions may reference technical documentation, authorize specific people to provide access information, or establish procedures for locating custody materials.

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Technical Documentation

Legal documents establish authority; technical documents enable access. These technical documents are not legal instruments in the traditional sense but are necessary complements to legal arrangements.

Custody documentation records wallet configurations, key arrangements, and access requirements. This documentation explains what exists and how it is organized. Without it, fiduciaries with legal authority may not understand what they are authorized to manage.

Recovery instructions explain how to restore access from backup materials. These step-by-step procedures enable someone unfamiliar with the setup to actually use the custody information. Instructions bridge the gap between having materials and being able to use them.

Location documentation specifies where physical and digital materials are stored. Seed phrases, hardware wallets, backup files, and documentation all have locations. Without location documentation, authorized parties may not find what they need.

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Tax and Compliance Documentation

Ongoing record-keeping creates documentation that becomes relevant for legal purposes even though it is not primarily a legal document. Tax compliance generates records that prove ownership, establish cost basis, and support positions if challenged.

Transaction records document acquisitions, dispositions, and transfers. These records support tax reporting and can establish ownership history. Maintaining complete transaction records during the holder's lifetime creates evidence heirs and fiduciaries can use later.

Cost basis documentation tracks acquisition prices and dates for tax calculation. Inherited bitcoin receives a step-up in basis to date-of-death value, but proving date-of-death value requires records. Cost basis documentation supports estate tax and beneficiary tax positions.

Valuation documentation captures point-in-time values. Year-end values, date-of-death values, and transaction values all serve compliance purposes. This documentation may not be legally required but supports positions if later questioned.

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Contractual Documents

Agreements with other parties may affect bitcoin custody and succession. These contracts create obligations and rights that interact with estate plans.

Key holder agreements govern relationships in multi-party custody arrangements. If someone holds a key in a multisig setup, terms of their participation may be documented in an agreement. What obligations they have, what compensation they receive, and what happens at the holder's death all may be specified.

Service agreements with custody providers or exchanges establish terms of the relationship. These agreements may address account succession, beneficiary designations, or estate access procedures. Understanding service agreements helps anticipate what happens at death.

Business agreements may affect personally held bitcoin if the holder's business situation is complex. Partnership agreements, shareholder agreements, or operating agreements may have provisions that affect how bitcoin is treated upon death or incapacity.

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Coordination and Gaps

Multiple documents working together can create coordination problems. Gaps between documents, inconsistencies among them, or failure to update all documents when circumstances change can undermine what individual documents accomplish.

Legal documents may reference technical documentation that does not exist or is outdated. A trust that mentions custody documentation assumes that documentation was created and maintained. If it was not, the trust provision references nothing useful.

Different documents may name different people for different roles. The executor named in the will may differ from the successor trustee named in the trust. Clarity about which person handles bitcoin specifically—regardless of their other roles—prevents confusion.

Updates may not propagate across all documents. When the holder changes beneficiaries in their will, they may forget to update their trust. When custody arrangements change, technical documentation needs updating. Keeping all documents synchronized requires ongoing attention.

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Document Creation Approaches

Documents can be created through different paths: self-drafted, attorney-drafted, or template-based. Each approach has different characteristics regarding validity, customization, and cost.

Attorney-drafted documents carry presumptions of proper execution and legal effectiveness. Attorneys bring expertise about formality requirements, applicable law, and strategic considerations. The cost of attorney involvement may be substantial for comprehensive planning.

Template-based documents provide starting points that may or may not suit specific situations. General templates were not designed for bitcoin. Even cryptocurrency-specific templates may not fit particular circumstances. Templates require evaluation against specific needs.

Self-drafted documents risk technical errors that can invalidate them. Informal documents may not meet legal formality requirements. What seems like adequate documentation may fail when actually tested in legal proceedings or estate administration.

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Summary

Understanding what legal documents for bitcoin exist reveals categories including estate planning documents (wills, trusts), incapacity planning documents (powers of attorney, healthcare directives), authority documents (trust instruments, guardianship designations), cryptocurrency-specific provisions (definitions, custody terms, access terms), technical documentation (custody records, recovery instructions, location documentation), tax records, and contractual agreements.

Legal documents establish authority and frameworks; technical documentation enables practical access. Both layers must exist and coordinate for bitcoin succession to work. Gaps between layers, inconsistencies among documents, and failure to update all documents when circumstances change create vulnerabilities.

Holders beginning legal planning face choices about which documents to create, how to create them, and how to coordinate legal instruments with technical documentation. The question of what documents are needed opens into broader questions about how the overall system functions.

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System Context

Examining Bitcoin Custody Under Stress

Bitcoin Estate Documents Needed

Bitcoin Inheritance Proof Documentation

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