Multi-Sig Custody and Inheritance

A question that I often get asked is, “Matt, what’s the best way to secure my Bitcoin holdings so that my spouse and children will be able to access and enjoy the wealth that I’ve helped build for them?”

My short answer almost immediately is: “Cold Stored within a Collaborative Multi-Sig.” Their response is usually something like, “Wow, ok, great. Now, what the hell is a Collaborative Multi-Sig?.”

This essay is my attempt to answer these questions so you walk away with a better understanding of the options and can figure out what is best for your family. 

The topic of inheritance is already a very complicated one. What works for one family, won’t work exactly the same way for another. A family of hardcore Bitcoiners, who run their own nodes and set up their own multi-sigs, may not require the same as a family with one brave Bitcoiner who lovingly leads a family of no-coiners (or worse, heirs with no interest in learning about Bitcoin!). 

To get started, we’ll need to cover some basic topics surrounding how you can hold the keys to your Bitcoin. I’ll do my best to outline what I think are some of the benefits and some of the risks of each setup.  I’ll start with 3rd party custody, then single-signature cold storage self-custody, then multi-signature self-custody, and lastly, multi-signature collaborative custody.  

If you want to skip this essay altogether, I’ll make it easy:  

I believe multi-signature collaborative custody is by far the best way to ensure continuity across generations and heirs, due to the increased security & built-in redundancy, and most importantly, having a Bitcoin expert who can be brought in to teach and guide your surviving loved ones.  

The last thing you want is for your heir (s), who know little about the true potential of Bitcoin in 2024, to sell your 3 Bitcoins for a Lambo and call it a day.  

We bitcoiners have listened, read, and watched a thousand hours of Bitcoin education. We have painstakingly held onto our “corn” during seemingly endless bear markets filled with fear, uncertainty, and doubt. We’ve gotten scoffed at by unaware and ignorant eggplant-level IQ non-player characters. We’ve watched tutorial videos and how-tos to learn to take possession of our keys and waited patiently for those first sats to arrive in our wallets with sweat dripping down our brows.  

We did not invest this much of our time and energy and resources so that our bitcoin would someday be lost or squandered.  NO! Our bitcoin will survive the journey, arriving safely to our children and grandchildren!! 

Let’s get into it.

Now you likely know the old Bitcoin phrase, “Not your keys, not your coin”. This speaks to the counterparty risk when your Bitcoin keys are held by someone else, be it a custodian, institution, or your great uncle. As long as you are not the one holding your keys, there is a risk that whoever is, could mismanage, steal, or lose your Bitcoin. 

Keep in mind that a core feature of Bitcoin is that it has final settlement. There are no “take-backs”, “charge-backs”, or “just-kiddings”. When Bitcoin travels on the network, there is no one to rescue it from a mistake or take it back by force from a bad actor.

Having a 3rd party custodial partner does come with a pretty huge benefit: they manage holding your Bitcoin keys so you don’t have to!  You can log in to their site, send the bitcoin at will, and don’t have to worry about messing up the storage element of your keys. 

I know many people who choose to go this route, at least for some of their bitcoin. Some view self-custody as too risky from a physical safety perspective ($5 dollar wrench attack) or are concerned that a family member could lose thousands or millions of dollars of value. With Qualified Custodians, many offer insurance against theft or mismanagement, and that also is appealing to those who don’t want the responsibility of being their own bank. Again, the BIG risk here is trusting that your counterparty will not rug you by accident or bad acting. 

Single-Sig is a great first step to feeling like a true Bitcoiner. This usually involves a key manager hardware device, like a Blockstream Jade, Cold Card, SeedSigner, etc. While they are called “wallets”, it is more precise to think of these like a “keyring”, since they hold multiple Bitcoin keys that are used to sign transactions on the Bitcoin network. 

With Single-Sig, you are no longer relying on any counterparty and you “can be your own bank”.  And Bitcoiners love to talk about “being their own bank”.  What people don’t talk about is the other side of the coin:  being your own bank can be stressful and risky too! 

However, if you keep your hardware device and/or your 12-word seed phrase in the gun safe, if there is a break-in and someone gets that 12-word seed phrase, they can easily take your hard-earned bitcoin into a different wallet that they control. 

This is more secure than a hot wallet where your keys are kept on an internet-connected device (since online hacking is a lot more common than home intrusions), but I do have one friend who put his written seed phrase and hardware device in a box when he moved and he sadly still can’t find it.

There are ways to make a single-sig more robust: most devices have an option for adding a “passphrase”, which is a secret 13th or 25th word or phrase. So if an attacker did find the 12-word seed phrase, they would still not have everything they need to steal your Bitcoin.  But this is not great for inheritance though. If Grandpa never told you what the passphrase was, you’re out of luck, even with the hardware device and the 12-word seed. 

Multi-Sig, as the name suggests, is a wallet configuration that instead of requiring one key signature to transact with your Bitcoin, multiple signatures are now required. The most popular is a 2-of-3 setup, where at minimum two key signatures are required to move your Bitcoin. (with only one signature, you can’t move your Bitcoin).

You can also configure a 3-of-5, 5-of-7, etc, or any combination of your choosing. But with each expansion of key signatures required, you introduce additional complexity, which is also a form of risk.  Businesses may require more complexity (for example, each Director or Board Member has a key, and all but two are required in order to transact). However, for most families, the 2-of-3 configuration has plenty of protection and minimal complexity and makes the most sense.

The pros here are many. With a 2 of 3 setup, you eliminate the single point of failure inherent to a single-sig setup. That is, if a thief comes across only one of the three hardware devices, with only that one device or seed phrase, they will be unable to do anything with your Bitcoin, since at least (2) key signatures are always required. 

With 3 hardware devices, you would obviously want to store each of those in 3 different geographical locations. Doing this helps to prevent theft, fire, flood, etc. For our topic of inheritance, the risk of setting up a multi-sig is that if you lose or accidentally destroy two or more of the required keys, you are out of luck and that bitcoin is gone forever. A single key by itself is never enough to access your generational wealth. This model also requires that your heirs understand Bitcoin fairly well and that they don’t lose the seed phrases, devices, or forget the pin codes to the devices. 

It is also an important criteria to store the wallet descriptor that will be generated by the 3 key combination when setting it up because with only two of them in possession, you will not be able to generate the addresses that correspond to the 2 of 3 setup. Multi-signature for beginners does have this gotcha that users need to be aware of if they are making multiple deposits to multiple addresses governed by this setup.

Multi-Sig Collaborative Custody is a multi-sig wallet configuration with a superpower: The added element of a trusted collaborative partner or custodian who will manage some number of your keys for you. Swan recently released the Swan Vault. This is our version of a collaborative custody 2-of-3 multi-sig, and it is awesome for inheritance planning.

The setup is simple: the family or individual has (2) Blockstream Jade hardware devices and Swan manages a third cloud-based key signature. Again, we chose to go with the 2-of-3 model, as this eliminates the single point of failure (because of the built-in redundancy of having (2) key signing devices) while not adding in more complexity than what is necessary. 

How does this work in practice? I usually give the following example: You can keep one Jade in your home, and the other Jade with a trusted relative, in a private vault, at the lake house, or at some other location you or your relatives can get to if needed. Most people can come up with a safe location for their second Jade outside of their home. 

Now, using your Jade at home, when paired with Swan’s cloud key, you can access your Bitcoin with full control, without ever needing to retrieve your 2nd Jade from its safe haven.  Whenever the cloud key is used within your 2-factor-authenticated Swan account, there is a mandatory 72-hour hold on broadcasting any transactions to further protect against coercion, theft, duress, etc. 

So why is Collaborative Custody Multi-Sig the best option for Inheritance? Consider this example: Bitcoiner Dad has done his best to teach his wife and adult children about Bitcoin, but they are just not interested yet. What will he do to ensure his stack of sats is not lost when he dies?  

Bitcoiner Dad can update his Trust, so there is an amendment that clearly communicates that he owns Bitcoin and his beneficiaries inherit it, with additional instructions that include something like*:

• He has a Swan account with an IRA full of Bitcoin, and a Swan Vault associated with his email address, BitcoinerDad@swanmail.com

• He has a Blockstream Jade held at Bitcoiner Credit Union’s safety deposit box number 21

• Instructions for his wife to retrieve the Jade and contact Swan, or to get connected with their Swan Private Advisor

As you can see, there’s nothing complex or super “Bitcoiny” about the above. If anyone got a hold of this information in the Trust, they can still not do anything with the Bitcoin without his 2nd signing device. However, his surviving wife can reach out to Swan and we can help her access her Bitcoin, the way Bitcoiner Dad intended, with the use of Swan’s cloud key and the (1) Jade in her possession.  

You’ll notice there were a few different transfers taking place. The first is the legal transfer (clearly documented in a Will or Trust who gets what). Just because someone has a key to the house, doesn’t mean that they own the house. 

The second transfer is the retrieving and handling of the hardware devices, seed phrases, etc. The wife may want to set up a new multi-sig Vault or may need to sell some bitcoin to pay for certain expenses. Swan can help her do what she needs to do. 

The third and most important transfer is knowledge transfer. As I  mentioned earlier, we wouldn’t want to see the bitcoin squandered or lost — or even underappreciated. At Swan Private, we can come alongside the surviving family and educate them so they really understand what they have been given. We help people who are new to Bitcoin every day, answering questions, sharing content, and helping with their first time sending or receiving Bitcoin. We love doing this. And that piece right there is why collaborative custody multi-sig is so valuable. You are not leaving your inheritance to a mourning family who wouldn’t know the first thing about Bitcoin, by themselves. You are providing a safety net of trusted Bitcoiners who can help guide your heirs and be there for them as they learn and progress. 

I hope this has cleared a few things up about custody options and how each has their own unique pros and cons. While I believe Collaborative Custody Multi-Sig is the best for inheritance planning AND minimizing attack vectors, it might make sense to diversify across a few different types of custody. You may have 80% of your Bitcoin in cold storage in a Swan Vault in order to ensure your heir has a trusted Advisor after you’ve departed. You might have some held in 3rd party custody with a Swan IRA for tax efficiency. You might even have a secret, single-sig hardware wallet that you keep in El Salvador as your bug-out coin. You can exercise lots of options. 

You can always reach out to your Swan Private Advisor to learn more about Swan Vault and/or to get assistance with finding a good estate planning attorney to create your Will or Trust. We know several Attorneys who are also Bitcoiners that we’d love to put you in contact with.

*I am not a legal professional. This is not legal advice. Please consult an attorney to

create/update your will or trust.