Multi-Sig Bitcoin Inheritance Explained

What Is Multi-Sig?

A multi-signature (multi-sig) wallet is a Bitcoin wallet that requires more than one private key to authorise a transaction. Instead of a single key controlling all funds, multiple keys must sign off before any Bitcoin can be moved.

The most common configurations are described as “M-of-N” — meaning M signatures are required out of N total keys. For example:

2-of-3: Three keys exist, and any two are needed to move funds
3-of-5: Five keys exist, and any three are needed

This structure is inherently suited to inheritance planning. It allows you to distribute control across multiple parties while ensuring that no single party — including yourself — can act alone.

Why Multi-Sig for Inheritance?

Multi-sig solves the fundamental tension of Bitcoin inheritance: security during your lifetime versus accessibility after your death.

With a single-signature wallet, you face a binary choice. Either someone else has your seed phrase (and could steal your Bitcoin while you are alive) or nobody else has it (and your Bitcoin dies with you).

Multi-sig eliminates this binary. In a 2-of-3 setup:

While you are alive: You hold one key and use it with a second key (perhaps on a hardware wallet you control) to manage your Bitcoin normally. The third key is held by someone else but is useless on its own.
After your death: Your heirs can combine the third key with whichever of your two keys they can access. They need two keys, and you have arranged for two to be available.

Nobody can steal your Bitcoin with a single key. Your heirs can recover it without needing all keys. And the system tolerates the loss of one key entirely.

Common Multi-Sig Configurations

2-of-3 (Most Common for Inheritance)

Three keys are created. Any two can authorise a transaction.

Typical key distribution:

Key 1: You — stored on a hardware wallet at home
Key 2: You — stored on a second hardware wallet in a bank safe deposit box or with a solicitor
Key 3: Heir or trusted party — stored separately, perhaps with a second family member or a collaborative custody service

During your lifetime: You use Key 1 + Key 2 for routine transactions. Key 3 holder cannot do anything alone.

After your death: Your executor retrieves Key 1 or Key 2 from your estate and combines it with Key 3 to access the funds.

Advantages: Simple to understand, works well for most family situations, tolerates loss of one key.

Disadvantages: Two colluding key holders can move funds. If you only hold one key yourself, you need the cooperation of another key holder for every transaction.

3-of-5 (Higher Security)

Five keys are created. Any three can authorise a transaction.

Typical key distribution:

Key 1: You — primary hardware wallet
Key 2: You — backup in safe deposit box
Key 3: Spouse or partner
Key 4: Solicitor (sealed envelope)
Key 5: Collaborative custody service

During your lifetime: You use your two keys plus one other for transactions (or use a collaborative custody service that co-signs when you authenticate).

After your death: Your heirs need any three keys. With you unable to sign, they need to access both of your keys plus one more — or access one of yours plus two other key holders. This provides multiple recovery paths.

Advantages: Very resilient. Can tolerate loss of up to two keys. No pair of people can collude to steal funds. Multiple recovery paths for heirs.

Disadvantages: More complex to set up and manage. Higher transaction overhead (three signatures needed every time). More coordination required.

Setting Up Multi-Sig

Software Options

Several wallet applications support multi-sig:

Sparrow Wallet — open-source desktop wallet with strong multi-sig support. Good for technically confident users who want full control.
Electrum — long-established Bitcoin wallet with multi-sig capabilities. Supports integration with hardware wallets.
Nunchuk — designed specifically for multi-sig with a user-friendly interface. Available on mobile and desktop.

Hardware Wallets

Multi-sig works best when each key is stored on a separate hardware wallet. Compatible devices include:

Coldcard — Bitcoin-only hardware wallet with native multi-sig support
Trezor — supports multi-sig through compatible software wallets
Ledger — supports multi-sig through compatible software wallets
Foundation Passport — Bitcoin-focused with multi-sig support

Each key holder should ideally use a hardware wallet from a different manufacturer for maximum resilience.

Collaborative Custody Services

For those who want multi-sig without managing all keys themselves, collaborative custody services provide a managed solution.

These services typically hold one key in a multi-sig arrangement while you hold the others. They co-sign transactions when you authenticate, but they cannot move your funds alone. If you lose access to their service, you can still recover your Bitcoin using the other keys.

Notable services include:

Casa — offers 2-of-3 and 3-of-5 multi-sig with inheritance planning features, including a dedicated key recovery process for heirs
Unchained — provides multi-sig vaults with institutional-grade key storage and inheritance support

These services charge annual fees but significantly reduce the technical burden of managing multi-sig keys and provide structured inheritance processes.

Key Distribution for Inheritance

The critical decision in multi-sig inheritance is where each key lives and who can access it.

Principles:

No single person should hold enough keys to move funds alone — this prevents theft by any individual party
Your heirs should be able to reach the threshold without your participation — otherwise the setup fails at the moment it is most needed
At least one key should be geographically separated — to protect against localised disasters (fire, flood, theft)
Key holders should know they hold a key but not necessarily know who holds the others — this limits the potential for collusion

Documentation is essential. Your letter of wishes must explain:

How many keys exist and how many are needed
Where each key is stored
Who holds each key
How to use the multi-sig wallet software
Step-by-step instructions for creating a transaction with multiple signers

Both multi-sig and Shamir’s Secret Sharing (SSS) allow threshold-based access, but they work differently:

Feature	Multi-Sig	Shamir SSS
What is split	Independent keys	A single seed phrase
Signing process	Multiple hardware wallets sign	Shares are combined to reconstruct one key
On-chain visibility	Multi-sig is visible in the transaction	Looks like a normal transaction
Key replacement	Can rotate individual keys	Must regenerate all shares
Wallet support	Good but not universal	Limited (SLIP-0039 / Trezor)

Multi-sig is generally preferred for larger holdings because each key is independent — compromising one key does not weaken the others. With SSS, once the shares are combined, the single seed phrase is exposed, creating a momentary vulnerability.

Costs and Complexity

Multi-sig transactions are larger than standard transactions, which means slightly higher network fees. The difference is typically small but worth noting for frequent transactors.

The primary cost is in hardware and time:

Multiple hardware wallets (£50-£200 each)
A collaborative custody service (£100-£500+ per year, optional)
Time to set up, test, and document the arrangement
Time to maintain and update as circumstances change

For holdings above £50,000, these costs are generally justified by the improved security and inheritance resilience.

Getting Started

Choose your configuration — 2-of-3 is recommended for most families
Purchase hardware wallets — at least two, preferably three different devices
Choose your wallet software — Sparrow, Nunchuk, or a collaborative custody service
Generate the keys — one on each hardware wallet, following the software’s multi-sig setup process
Test the setup — send a small amount, then practise creating and signing a transaction with the threshold number of keys
Document everything — write step-by-step instructions for your heirs in your letter of wishes
Brief your key holders — make sure everyone knows their role

Multi-sig adds complexity, but it provides the strongest available framework for Bitcoin inheritance. For significant holdings, it is the most responsible approach to ensuring your Bitcoin reaches the people you intend it for.

Seed Phrase Inheritance — If multi-sig is too complex, start here with single-key inheritance methods.
How to Pass Bitcoin to Your Family — The complete handover plan that multi-sig fits into.
Finding a Crypto-Literate Solicitor — Your solicitor may need to hold one of the keys.
Matthew Mellon: A Fortress Nobody Could Open — What happens when security complexity defeats inheritance.
Clifton Collins: 12 Wallets, One Location — Why distributing keys across locations matters.

Multi-Sig Inheritance Explained