The answer does not require sharing your secrets with anyone today. It requires organization: knowing what you own, where it is held, who can help and exactly what remains in the owner's hands alone. This article provides general information only and is not legal, tax or financial advice. For questions about a specific case, consult a lawyer specializing in inheritance law and an accountant.
You Can Convince a Bank, but Not the Network
With a regular bank account, heirs present documents and the bank acts on them. For bitcoin held in a self-custody wallet, there is no such institution. The network does not know who has died, who the heir is or what the will says. It recognizes only a digital signature created using the private key. Many wallets allow keys to be recovered from a list of 12 or 24 words, so whoever holds that list effectively holds the money.
This creates an important distinction between two situations. When bitcoin is held on a trading platform, a company manages the keys and has procedures for heirs. When bitcoin is held in a self-custody wallet, such as a hardware wallet or phone app, there is no one to contact. Anyone who wants to fill in these basics can find information about Bitcoin in Hebrew, including guides to wallets and recovery phrases.
Each approach carries a different risk. On a platform, the dependency is on the company and its procedures. In a self-custody wallet, it is on the owner and what they have left behind. One of the best-known stories in crypto shows how the two problems can intersect.
What Really Happened at QuadrigaCX
In January 2019, Canadian cryptocurrency exchange QuadrigaCX announced that its founder and CEO, Gerald Cotten, had died in India in December 2018. It soon became clear that customers could not get their money, and a simple explanation spread online: only Cotten knew the wallet passwords, and the secret had died with him.
The fuller picture emerged later. According to the Ontario Securities Commission's report, more than 76,000 customers were collectively owed $215 million, of which only $46 million had been located or recovered. The commission determined that most of the shortfall resulted from Cotten's own fraud: accounts under false names, fictitious balances, trading customer funds on other platforms and using money for his personal needs. According to the report, the exchange operated like a Ponzi scheme, and the problem was not lost keys.
The lesson is twofold. On one hand, a single person controlling all the keys alone, without oversight or documentation, is a point of failure even while alive. On the other, holding assets on a platform does not remove the need to examine the platform itself. For inheritance planning, this means two things: know exactly where the assets are and do not assume someone else has already taken care of it.
A Map, Not a Key: What the Family Needs to Know
The first tool is a simple document you might call a "map." It contains no secrets, but describes where they are. It should include:
- Which digital assets exist, without necessarily stating exact amounts.
- Which platforms have accounts, and under which name or email address.
- Which self-custody wallets exist: a hardware wallet, an app or a wallet on a computer.
- Where recovery backups are stored, without writing the words themselves in the document.
- Which professionals know the situation, such as a lawyer or accountant.
For illustration only: "One hardware wallet is in the home safe. Its recovery list is in a sealed envelope held by the lawyer. Another account is open on a trading platform, in my name and with my personal email address." Three lines like these can save a family months of guesswork.
It is best not to write the recovery words themselves in a will. A will usually passes through many hands: family members, lawyers and institutions. It is enough for the will or map to point to where the backup is stored, with access available to the appropriate person only when the time comes.
How to Leave Access Without Giving Away the Secret
There is no single solution for everyone, and every option has a cost. A sealed envelope with a trusted person or in a safe is the simplest solution, but its security depends entirely on the person and the location. Dividing information between two places, such as the hardware wallet in one place and the backup in another, makes theft harder but requires the family to know about both.
A more advanced option is a multisignature wallet, or multisig, which requires several signatures from a set of keys to transfer money, for example two out of three. No single key is then enough for a thief, and losing one key does not lock away the money. However, this is a complex solution requiring technical understanding, and unclear documentation can turn it into a trap for the heirs themselves.
Whatever solution you choose should be tested in practice. A backup that has never been tested is an assumption, not a backup. Another rule to remember, including during sensitive times: no genuine customer service representative will ask you or your family for the recovery words. Such a request is a clear sign of attempted fraud.
When Assets Are on a Platform: What Heirs Will Be Asked For
Here the process is more like dealing with a bank. The platform will generally request documents proving the death and the heirs' entitlement, and it is worth contacting it directly through its official website to establish exactly what is required. The process may take time, especially if the platform operates outside Israel.
In Israel, inheritance orders and probate orders are requested from the offices of the Registrar of Inheritance Affairs, part of the Administrator General at the Ministry of Justice, except for applications submitted to religious courts. According to the Kol Zchut website, in some cases the registrar refers the application to the Family Court for a decision. Questions about taxation and reporting digital assets as part of an inheritance depend on the circumstances and should be discussed with an accountant.
The map helps here too. An heir who knows which platform holds the account and which email address it is registered under starts in the right place. An heir who does not know may never discover that the account exists.
Three Mistakes That Keep Recurring
The first mistake is convenience in the wrong place. A photo of the recovery words on a phone, a file in the cloud or a draft in an email account may look like an organized backup, but they expose the secret to anyone who gains access to the account. A good backup should be available to the family on the right day, not to every intruder on any other day.
The second mistake is keeping everything in your head. Some people prefer not to write anything down for fear that the information will fall into the wrong hands. The concern is understandable, but the result can be the same as losing it: if only one person knows, the knowledge disappears with them. A map describing where things are without revealing them is a reasonable middle ground.
The third mistake is forgetting the small holdings. An old wallet from when Bitcoin first sparked curiosity, an account on a platform no longer used or a small balance left in an app. Such assets tend to vanish from the list, and sometimes their value has changed since then without anyone noticing. They too deserve a decision: consolidate, document or close them.
One Check a Year
Inheritance planning for digital assets is not a document to write once and forget. Wallets change, platforms close and passwords are updated. A brief annual review, perhaps on a birthday or at the start of the calendar year, can cover a few questions: Is the map up to date? Are the backups in place? Does the person who should know still know?
Ultimately, Bitcoin's strength and weakness are the same thing: there is no intermediary. Anyone who chooses to hold their own keys also chooses to take sole responsibility for ensuring they do not disappear with them. A simple map, a tested backup and one conversation with those close to you are not the whole answer, but they make the difference between an inheritance that can be accessed and a sum that exists only on the blockchain.
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