Locked Forever: The Risk of Lost Bitcoin Keys
When a Bitcoin owner dies, their self-custodied wallet's keys are the only thing that can unlock the coins and transfer ownership. However, if the keys are lost, the coins remain permanently locked on the blockchain.
According to Chainalysis, approximately 3.7 million BTC worth around $315 billion is estimated to be lost due to heirs not being able to find the wallet keys.
To avoid this issue, it's crucial not to write the seed phrase directly in a will. Wills become public records during probate, allowing anyone to access the seed phrase and potentially drain the wallet before heirs can act.
A more secure approach is to keep evidence of the Bitcoin's existence separate from the keys. The will or trust can refer to the Bitcoin in general terms without including any sensitive information that an outsider could misuse.