Crypto Asset LawFamily LawInformation Technology LawInheritance LawEstate Planning with Shamir Secret Sharing: Technical Design and Legal Framework

Shamir’s Secret Sharing (SSS) is a cryptographic method that enables a single secret to be divided into multiple shares, such that the secret can only be reconstructed when a pre-determined number of shares are brought together. The aim in inheritance planning is to prevent the seed phrase or the key information required to decrypt it from being held by a single person; it is to make access conditional upon the fulfilment of multiple conditions following the testator’s death.

This technical framework is not a specifically regulated estate institution under Turkish law. In Turkey, there are as yet no published precedents from the Court of Cassation or Regional Courts of Appeal regarding how Shamir Secret Sharing should be applied in relation to wills, joint inheritance or estate administration. Therefore, the assessment must be based on the provisions of the current Turkish Civil Code and the legal analogies most closely resembling them.

Technical Framework

SLIP-39 is a standardised method designed to divide a secret into recovery shares and reconstruct it when a specific threshold is met. For example, if five shares are created and the recovery threshold is set at three, the master secret can be reconstructed when any three of the five shares are brought together. A single share, as a rule, is not sufficient to reveal the seed phrase or the master secret.

The shares may be held by different individuals, in different cities or at different storage locations. For example, two shares could be held by a trusted individual, one share in a sealed envelope stored at a notary’s office, one share in a safe-deposit box at a bank, and one share with a backup custodian. This distribution makes it difficult for the shares to be compromised by a single attack or loss event.

In terms of physical storage, options such as a metal plate, sealed paper, a security envelope, a bank safe deposit box and storage at a notary’s office may be considered. Digital photographs, cloud storage or email may increase the risk of the share being copied and of unauthorised access.

However, the SSS is not a signature system. Gathering a threshold number of shares enables the secret to be reconstructed; thereafter, the person or persons able to use the seed phrase can technically transfer the assets in the wallet. Therefore, the technical threshold is not the same as legal authority to dispose of assets.

Determining Shareholders and the Will

Who should be designated as share holders?

When determining share holders, consideration must be given not only to the relationship of trust but also to death, illness, unavailability, status as an heir, conflicts of interest and technical competence. Share holders may be selected from the following groups:

• One or more of the heirs,
• Trustworthy individuals who are not heirs,
• A professional adviser or institutional custodian,
• Physical storage locations such as a notary’s office or a bank safe deposit box,
• Legal entities such as companies or trusts.

The allocation of a share to one of the heirs does not confer sole authority over the entire estate upon that person. The holder of a share may merely be a part of the technical administration process. Legal rights and obligations relating to the entire estate are determined within the framework of heir status and the rules governing the community of heirs.

Under the Turkish Civil Code, heirs acquire the estate as a whole upon the death of the testator.

How should a will be drawn up?

The will may specify who the beneficiaries are, where the shares are held and under what conditions they are to be consolidated. However, the will is not the shares themselves. The will merely sets out the testator’s final wishes and the legal process to be followed by the beneficiaries.

A formal will is drawn up by a public official in the presence of two witnesses. The public official may be a notary or a magistrate. This method provides a more formalised structure in terms of the drafting of the will, the verification of identity and legal capacity, its safekeeping and its opening following the testator’s death.

In the case of a holographic will, the text must be written entirely in the testator’s own handwriting from beginning to end, dated and signed. A holographic will may be deposited with a notary, a justice of the peace or an authorised official, either in an open or sealed form.

From a practical point of view, a formal will provides a stronger starting point for proving instructions regarding the consolidation of shares. However, the notarial procedure does not guarantee that the SSS system is functioning or that the shares are technically correct. Even if all shares are explicitly listed in the will, this does not eliminate the security risk.

How is a ‘Key Consolidation Meeting’ Organised?

It is not secure for shareholders to simply meet at random to consolidate their shares. The testator may specify the following preconditions in an addendum to the will or in a separate contract:

• Presentation of the death certificate,
• A magistrate’s order confirming the opening of the will,
• A certificate of inheritance or a declaration of inheritance,
• Verification of the shareholders’ identities,
• Verification of the seal and registration number of each share,
• Confirmation of the address and network to which the wallets holding the shares belong,
• Recording of the consolidation process in the minutes,
• Transfer of assets to a new, jointly controlled wallet,
• Recording the balance and transaction history prior to the transfer.

These preconditions may be imposed as obligations on the shareholders by means of a contract. The Turkish Code of Obligations recognises that the parties may freely determine the content of the contract within the limits prescribed by law. Consequently, shareholders may make the following obligations the subject of a contract: the delivery of shares, attendance at meetings, compliance with identity verification, the execution of the transaction by way of a record, and the non-disclosure of confidential information to third parties.

However, such a contract does not remove the formal requirements of the will. The contract regulates technical and operational procedures; as to whom the estate passes after death or how reserved shares are protected, these matters are governed by the mandatory provisions of inheritance law.

Death or Inaccessibility of the Shareholder

In the SSS framework, the choice of threshold is the most critical element of the inheritance plan. If a rescue can be carried out with three out of five shares, the loss of two shares may not render the system inoperable. However, situations such as the death of shareholders, mass deaths within the same family, long-term illness, disappearance, loss of contact or legal disputes must be planned for separately.

A reserve share mechanism can be established in the following ways:

• Creating two reserve shares in addition to the five main shares,
• The reserve share holder may only participate in the process upon presentation of specific documents,
• In the event of a share holder’s death, the share is transferred not to the heir but to a pre-designated reserve custodian,
• Requiring a death certificate and a certificate of probate to be provided before the reserve share can be utilised,
• Appointing a second reserve holder should the reserve holder refuse the role or be unreachable.

The fact that a reserve holder is named in the will does not make that person an heir. The person merely assumes a role in the technical access process. Whether or not they acquire economic rights over the asset must be specifically provided for in the will or inheritance contract.

If the holder of a share dies, the transfer of the envelope or storage medium containing that share to the heirs does not imply that the other shares will be opened immediately. The legal status of the share within the estate and its technical availability must be assessed separately.

Shareholders Combining the Secret by Prior Agreement

Shareholders may reconstitute the secret by reaching a threshold number whilst the testator is still alive. This is technically possible. The SSS does not automatically monitor the date on which, or the purpose for which, individuals have combined their shares.

To mitigate this risk, the following provisions may be included in the contract with the shareholders:

• Shares may not be combined without the testator’s written consent,
• The consolidation process must be carried out only at a specified location and under recorded conditions,
• A prohibition on copying the secret and transferring it to an electronic medium,
• A contractual penalty in the event of a breach,
• Compensation for any resulting loss,
• The return of the share and transition to a new redemption scheme,
• The removal of the shareholder from office or the appointment of an alternate shareholder.

These provisions may act as a deterrent; however, they do not always provide sufficient protection once a blockchain transfer has taken place. If the assets have been transferred to another address and the new private key remains solely under the control of the party at fault, a legal claim does not automatically resolve the technical issue of restitution.

For this reason, following the secret-sharing meeting, consideration should be given to transferring the assets not to a shareholder’s personal wallet, but to a new multisig wallet under the joint control of the heirs or to a secure escrow arrangement. A multisig structure is not a solution in itself; the identities of the threshold signatories and how authorisation is to be updated in the event of death or a dispute must also be regulated.

Compliance with Turkish Wills Law and the Issue of Enforcement

An SSS plan is not recognised under Turkish law as an independent succession mechanism in place of a will. This technical arrangement should be designed as an implementation plan to support the will.

The will must be validly drawn up, either in a formal or handwritten form. It is possible to specify the beneficiaries in the will, to state where the shares are held, and to set out the conditions for the distribution meeting. However, these provisions cannot override the rights of heirs entitled to a reserved share.

Where there are multiple heirs, a community of heirs arises until the estate is distributed. The heirs hold the estate jointly and, as a rule, exercise their rights over the estate collectively.

Consequently, the fact that three co-owners form a secret arrangement to share the assets amongst themselves does not extinguish the rights of the other heirs. If necessary, at the request of one of the heirs, an application may be made to the magistrates’ court for the appointment of a representative for the estate partnership and for the protection of the estate.

Issues regarding enforcement or implementation arise particularly in the following circumstances:

• If the will does not specify the location of the shares,
• If the identities of the beneficiaries are unclear,
• If one of the shares is missing,
• If the number of thresholds or the software used is unknown,
• If a link cannot be established between the wallet address and the will,
• If it is not clear to whom the assets are bequeathed,
• If the technical instructions contravene the rules governing reserved shares or joint inheritance.

The court may interpret the will; however, it cannot create a missing share, run faulty software or automatically reverse a completed transfer on the blockchain.

Warnings: The Collapse of a Fiction Lacking Legal Documentation

Testator A established an SSS scheme that operates when three out of five shares are brought together and distributed the shares amongst three friends and two relatives. However, they did not draw up a will, did not sign a contract with the shareholders, and did not record the wallet address in any document.

Following A’s death, three shareholders come together. They generate the seed phrase and transfer the assets to new addresses they have agreed upon amongst themselves. A’s two children claim that these assets form part of the estate. However, it cannot be documented which address belonged to A, the total value of the assets in the wallet, the capacity in which the shareholders were acting, or whether the transfer was in accordance with A’s final wishes.

In this case, the technical mechanism has functioned, but the legal framework has collapsed. The children may make claims regarding the determination of the estate, restitution or recovery of debts; however, they may be required to prove the connection between the assets and the original address, the details of the stakeholders, and that the transfer was unjust. Without supporting evidence and an implementation protocol, the SSS system remains merely a technical access mechanism.

Warnings

1. The SSS is not a will. The consolidation of shares does not create heir status or a right of ownership.

2. Storage with a notary does not constitute technical verification. The notary does not guarantee that SLIP-39 shares have been correctly generated or that the wallet is functioning.

3. Including a seed phrase in a will poses a security risk. Keeping each share separately does not, on its own, resolve the access risk arising from the will being opened after death.

4. The threshold for joint inheritance is not the same as the threshold for a joint signature. The fact that, technically, three people are sufficient does not mean, in legal terms, that three people can dispose of the estate on their own.

5. There is as yet no published precedent on this matter in Turkey. Practice will be shaped by the adaptation of existing provisions of the Turkish Civil Code to the cryptographic access structure.

Consequently, a viable plan would include: a formal or valid handwritten will, a separate storage and transaction agreement with the beneficiaries, a backup share mechanism, conditions for death and identity verification, a joint wallet or multisig transfer procedure, and the maintenance of transaction records. The establishment of just one of these elements does not mean that the inheritance plan is complete.