Custody Architecture for Crypto

The single point of failure is the enemy. A seed phrase on one sheet of paper in one drawer is one fire, one flood, or one burglary away from zero. Build redundancy without building exposure:

• Multi-signature wallets. A 2-of-3 arrangement — one key with the principal, one with the spouse or estate attorney, one with a corporate fiduciary that has genuine digital-asset custody capability — means no single person can move funds and no single loss is fatal. Multi-sig is enforced on-chain by the wallet contract: any signed transaction missing the threshold is rejected by the network, not by a third party. Pick the threshold to match the failure modes you care about: 2-of-3 survives the loss of any single key (the common case); 3-of-5 survives two simultaneous losses and is appropriate for nine- or ten-figure custody. Distribute the keys across people, institutions, and physical jurisdictions — two keys in the same safe is one key.
• Shamir’s Secret Sharing. A different mechanism with similar arithmetic. SSS splits a single seed phrase or private key into $N$ mathematical shares with an $M$-of-$N$ threshold to reconstruct it; the original key still exists once reassembled, which is both the feature and the weakness. SSS works with any single-signature wallet and is the right tool when on-chain multi-sig is impractical — some chains, some hardware, some exchanges. It is the wrong tool when the reconstructed key is exposed even briefly, because at that moment you are back to a single point of failure. As a rule of thumb: use on-chain multi-sig for custody, SSS for seed-phrase backup.
• Durable physical backup. A hardware wallet plus a stamped-metal (fireproof) seed backup in a bank vault. The trust holds instructions, never the keys themselves.
• A digital-asset inventory. A regularly updated schedule of accounts, wallets, and where access materials live — kept with the estate attorney or referenced by the trust, never inside the public will. A password manager with a vetted emergency-access feature can carry the account-based half of this list.
• A capable fiduciary. Many traditional trustees still cannot operate a hardware wallet, and a trustee who cannot operate one is a trustee who will lose the asset. Choose a corporate fiduciary or family office with a real digital-asset practice, or pair a conventional trustee with a named technical co-trustee.

For the tax treatment of the assets themselves — realization, basis, the wash-sale gap — see section “Cryptocurrency and Digital Assets”. Crypto is property: it enters the gross estate at date-of-death fair market value and receives a basis step-up like other capital assets (section “Capital Gains Resets With Inheritance”). Valuing thinly traded tokens and NFTs is genuinely hard, so document the methodology — but the harder problem is almost never the tax. It is proving the asset exists and reaching it.