In short
In a 2-of-3 multisig you hold two keys and give the third to someone you trust. That person can’t move your coins alone. After your death, your heirs combine their key with one of yours. It’s one of the most robust setups there is, and one of the hardest to explain.
How it works
A multisig wallet needs more than one key to move coins. In the common 2-of-3 setup, three keys exist and any two of them can sign a transaction. No single key is enough, so a thief who finds one gets nothing, and losing one key doesn’t lose the coins.
That same property makes it useful for inheritance:
- You keep key A and key B, for example on two hardware wallets in two places.
- A trusted person keeps key C: a lawyer, an executor, a relative who lives elsewhere.
- While you’re alive, you sign with A and B. Key C just sits there.
- After your death, your heirs find key A (or B) using your letter of instruction, and ask the keyholder of C to sign with them.
Unchained, which runs collaborative multisig for a living, describes the same idea: a key held by “an executor, trustee, or other trusted third party” who can’t spend on their own but can help your heirs spend (source).
What the heirs need besides the keys
This is the part that trips people up. A multisig wallet is defined by all three public keys together, in a specific setup. Your heirs need that definition, usually a small file called the wallet configuration or descriptor. With two of the three seeds but no descriptor, the wallet can’t be rebuilt at all, because the third key’s public half is missing.
The descriptor isn’t secret in the sense that it can’t spend anything. It does reveal your balance and history to whoever has it. Keep copies with each key and in your inheritance papers. The sister site explains it in more detail: What is a wallet descriptor?
Who should hold the third key?
- Someone you’d trust with half the job, not someone you’d trust with everything. They can’t spend alone, but they’re one step closer than anyone else.
- Someone likely to outlive you, and easy to reach.
- Someone who won’t lose a small device or a steel plate over ten years. A law firm or notary is used to keeping things safe for decades.
- Not someone who lives with you or near your other keys. One burglary or fire shouldn’t reach two keys at once.
Collusion is the real risk
Two keys can move the coins. If the person holding key C also has access to key A, say because they’re your partner and A is in the bedroom safe, they can move everything while you’re alive. Put the third key with someone who can’t reach your own two.
Telling the keyholder what to do
The keyholder needs short instructions of their own:
- What the device or plate is, and that it must be kept safe and secret.
- That they should never sign anything at the request of someone they don’t know, and never while you’re alive unless you ask them in person.
- Who your heirs are and roughly how the process will go.
- What to do if they move, change number, or no longer want the responsibility.
Ethereum and other chains
Multisig in the Bitcoin sense doesn’t exist for most other coins. On Ethereum and compatible networks, the nearest equivalent is a smart-account wallet such as Safe, which can require several signers. Safe’s recovery module lets you name recoverers who can propose a change of signers after a delay (28 days by default), during which the current signers can reject it (source). Safe doesn’t market this as an inheritance product, and it only covers assets held in that Safe account, but the mechanism is close.
Building one
A good multisig takes a weekend to set up properly and a rehearsal to trust. The step-by-step guide at multisigsetup.com covers the whole thing for Bitcoin, including an article on inheritance with a multisig.
Next: Timelocked recovery keys, a way to do something similar without a third person.