Building a Bitcoin-Native Family Office

If you've decided that Bitcoin is a meaningful part of your family's balance sheet — and if you're reading this, that decision is likely already made — the question becomes: what infrastructure does that require?

Not what Bitcoin wallet to use. Not which exchange has the best fees. Those are implementation details that come later, and they change frequently. The structural question is deeper: how do you build the organizational, legal, and operational framework that treats Bitcoin not as a speculative position but as the foundational asset around which your family's wealth is organized?

This is the question we address in this piece. Not as a checklist — checklists are for simple problems, and this isn't one — but as a framework for thinking about the problem correctly. If you get the framework right, the implementation details will follow naturally. If you get the framework wrong, no amount of tactical excellence will save you.

We should be clear about who this is for. This is not a guide for someone considering their first Bitcoin purchase. This is for families where Bitcoin already represents — or is expected to represent — a substantial portion of family wealth. Families where the question has shifted from "should we own Bitcoin?" to "how do we build around it?" If that describes your situation, what follows is the advisory letter we wish someone had written for us. For those still forming the foundational conviction — the macro case, the monetary history, the why — we recommend starting with our Complete Guide to Bitcoin Family Offices, which covers those questions in depth before addressing structure.

The Foundational Decision: What Kind of Entity Are You?

Before you hire anyone, before you choose a custodian, before you draft a governance document, you need to answer one question: what legal structure will house your family office?

This is not a Bitcoin-specific question, but Bitcoin makes it more consequential. The entity structure you choose will determine your tax treatment, your liability exposure, your ability to implement certain custody arrangements, your estate planning options, and the regulatory framework you operate within. Changing it later is expensive and disruptive. It's worth getting right the first time.

The most common structures for Bitcoin-centric family offices are:

Limited Liability Company (LLC). The most flexible option for single-family offices. An LLC provides liability protection, pass-through taxation (avoiding double taxation), and enormous flexibility in governance structure. For families holding Bitcoin directly, the LLC can be structured so that Bitcoin is held as a long-term capital asset, and the operating agreement can encode governance rules about signing authority, transaction approval thresholds, and succession protocols.

Family Limited Partnership (FLP). Particularly useful for families planning intergenerational wealth transfers. The FLP separates general partner (management and control) from limited partner (economic interest) roles. This distinction is powerful for Bitcoin families because it allows the founding generation to retain control over custody and transaction authority while transferring economic interests to the next generation — often at a valuation discount for gift and estate tax purposes. We explore this extensively in our piece on multi-generational Bitcoin wealth and estate planning.

Trust structures. For families where asset protection and estate planning are the primary objectives, holding Bitcoin within trust structures — irrevocable trusts, dynasty trusts, or purpose trusts — provides powerful benefits. The tradeoff is reduced flexibility: trust structures are harder to modify and require careful alignment between the trust terms and the Bitcoin custody arrangement. A trust that says your heir controls the Bitcoin is meaningless without a corresponding key management plan that actually gives them access.

Wyoming DUNA (Decentralized Unincorporated Nonprofit Association). An emerging option worth monitoring. Wyoming's DUNA legislation, passed in 2024, creates a legal wrapper specifically designed for decentralized organizations. While primarily aimed at DAOs, the structure has interesting applications for families seeking to formalize governance around Bitcoin holdings with features like token-based voting or algorithmic distribution rules. This is on the frontier — we wouldn't recommend it as a primary structure today, but it signals where the legal landscape is heading.

For most families, we recommend starting with an LLC as the family office entity, potentially with one or more trusts for specific Bitcoin holdings intended for intergenerational transfer. This provides the flexibility to adapt as the regulatory and tax landscape evolves — and it will evolve.

The goal is not to find the perfect structure. The goal is to find a structure that is good enough today and adaptable enough for tomorrow.

Phase One: Audit and Assessment

The first phase of building a Bitcoin-native family office is not building anything. It's understanding what you already have.

This sounds obvious, but it's remarkable how many families with significant Bitcoin positions have never conducted a comprehensive audit of their holdings. Bitcoin's history is one of self-custody, exchange accounts opened years ago, hardware wallets purchased in different eras, and informal arrangements that made sense at the time but don't scale.

A proper audit should document:

Every Bitcoin holding. All wallets, all exchange accounts, all custodial arrangements. Not just the ones you actively use — the ones you've forgotten about too. Include on-chain addresses, UTXO sets, and current balances. This is the raw material your family office will be built around.

Cost basis for every lot. This is critical for tax planning and often the hardest piece to reconstruct. If you acquired Bitcoin across multiple exchanges over multiple years, assembling an accurate cost basis record requires forensic work. Do it now, before you need it. The IRS's reporting requirements are tightening, and families who can't document their cost basis are at the mercy of whatever assumption the IRS makes — which is typically the least favorable one. More on this in our tax optimization analysis.

Key management status. For each self-custodied holding: where are the keys? Who has access? Is there a backup? Is the backup secure? When was it last verified? We've seen cases where families had millions of dollars in Bitcoin secured by a seed phrase written on paper stored in a desk drawer. That's not custody. That's luck. Our custody solutions analysis provides a framework for evaluating and upgrading your security posture.

Legal and tax posture. What entities currently hold Bitcoin? In what jurisdictions? Under what tax elections? Are there outstanding tax obligations? Unreported positions? The compliance landscape for Bitcoin has changed dramatically in the last several years, and positions that were legal to hold informally in 2015 may now have reporting requirements that weren't met.

This audit is the foundation. Everything that follows is built on it. Conduct it with the rigor of a financial audit, because that's what it is.

Phase Two: Design the Custody Architecture

With the audit complete, the next phase is designing the custody architecture that will secure the family's Bitcoin going forward. This is the most technically demanding phase and the one where the consequences of error are most severe.

We cover the full spectrum of custody options in our dedicated custody analysis. Here, we'll focus on the design principles that should guide the decision.

Principle 1: Eliminate single points of failure. No single device, no single location, no single person should be capable of either accessing or losing the family's Bitcoin. This is the most important principle, and it alone disqualifies most simple custody arrangements. A single hardware wallet, no matter how secure, is a single point of failure. A single person who knows the seed phrase is a single point of failure. The custody architecture must be designed so that the loss or compromise of any single element does not result in loss of funds.

Principle 2: Separate authority from capability. The people who have legal authority to make decisions about the Bitcoin should not necessarily be the same people who have technical capability to move it. This separation of powers — familiar from corporate governance but novel in Bitcoin custody — provides protection against both internal and external threats. A family member who is authorized to approve a transaction but cannot unilaterally execute it is protected from coercion. A technical administrator who can execute transactions but only with proper authorization is constrained from acting independently.

Principle 3: Design for the worst case. Your custody architecture should be resilient to: death or incapacitation of any single key holder, physical compromise of any single storage location, legal action in any single jurisdiction, and adversarial action by any single family member or employee. If your custody arrangement fails under any of these scenarios, it's not ready for family-office-scale Bitcoin.

Principle 4: Test before you trust. Before migrating significant holdings to a new custody arrangement, test it thoroughly. Send a small amount. Verify that every signer can sign. Verify that the recovery process works. Verify that the backup procedures are functional. Do a tabletop exercise where you simulate the loss of one key. Then simulate the loss of a different key. Identify where the process breaks and fix it before the stakes are real.

For most families, the right architecture is a multisignature arrangement — typically a 2-of-3 or 3-of-5 scheme — where keys are distributed across family members and/or trusted institutions, stored in geographically separated locations, and backed up with tested recovery procedures. Collaborative custody services, such as those offered by Unchained, can serve as one of the key holders, providing professional key management without requiring the family to surrender control.

Phase Three: Build the Governance Framework

Custody answers the question of how the Bitcoin is secured. Governance answers the question of who decides what happens to it.

In a traditional family office, governance is primarily a legal and interpersonal exercise. The family establishes a board or investment committee, adopts bylaws or an operating agreement, and makes decisions according to defined procedures. The execution of those decisions — moving money, buying assets, making distributions — is handled by custodians and administrators who are separate from the decision-making process.

In a Bitcoin-native family office, governance and custody are intertwined in a way that has no precedent in traditional finance. The person who holds a signing key has operational power that exists independent of legal authority. If a family member holds one of three multisig keys and decides to go rogue, no court order can revoke their ability to sign transactions. The key works regardless of legal status.

This means governance must be designed with technical enforcement in mind, not just legal enforcement.

A sound governance framework for a Bitcoin family office should address:

Transaction authority tiers. Define thresholds. Below $X, a single authorized signer can approve. Between $X and $Y, two signers are required. Above $Y, a full committee approval is needed. These thresholds should be encoded in both the governance documents and, to the extent possible, in the custody architecture itself.

Regular verification cadence. Schedule quarterly or semi-annual "proof of keys" exercises where all signers verify their ability to sign. This serves both a security function (confirming key integrity) and a governance function (confirming that all authorized signers are still willing and able to participate).

Signer succession protocol. What happens when a signer dies, becomes incapacitated, or leaves the family office? The protocol for adding and removing signers should be defined in advance and tested before it's needed.

Dispute resolution. What happens when family members disagree about whether to sell Bitcoin, how to distribute proceeds, or whether to change the custody arrangement? Families that don't define this in advance will litigate it later. And litigation involving Bitcoin custody creates risks — particularly around key disclosure and court-ordered transfers — that traditional asset disputes don't.

Information rights. Which family members can view balances? Which can see transaction history? Who receives reports, and how frequently? Transparency builds trust, but privacy within the family may also be important. Define the boundaries explicitly.

Phase Four: Integrate Tax and Legal Infrastructure

With custody and governance in place, the next phase is building the tax and legal infrastructure around them.

For tax purposes, the key decisions include:

Entity tax elections. If the family office is structured as an LLC, it can elect to be taxed as a disregarded entity, a partnership, or an S corporation. Each election has different implications for Bitcoin gains, particularly around the treatment of long-term capital gains, self-employment tax, and the 3.8% net investment income tax. The right election depends on the family's specific situation and should be made with advice from a tax professional who understands both family office taxation and Bitcoin's unique characteristics.

Lot accounting method. The IRS allows several methods for identifying which Bitcoin is being sold when you dispose of a partial holding: FIFO (first in, first out), LIFO (last in, first out), HIFO (highest in, first out), and specific identification. The choice of method can have enormous tax consequences for families with positions acquired over many years at widely varying cost bases. Specific identification generally provides the most flexibility but requires meticulous record-keeping. This is covered in detail in our tax optimization analysis.

State tax considerations. Bitcoin taxation varies significantly by state. States like Wyoming, Texas, and Florida have no state income tax. States like California tax capital gains as ordinary income at rates up to 13.3%. For families with geographic flexibility, the choice of domicile can represent millions of dollars in tax savings over a lifetime. Some families establish their family office in a tax-favorable jurisdiction while maintaining residences elsewhere — but this requires careful compliance with each state's residency rules.

On the legal side, the key infrastructure includes:

Investment Policy Statement (IPS). A formal document that defines the family's investment philosophy, asset allocation targets, rebalancing rules, and risk parameters. For a Bitcoin-native family office, the IPS should address Bitcoin-specific considerations: under what conditions would the family reduce its Bitcoin allocation? What percentage of holdings should be kept in liquid form for operational needs? How should the family think about Bitcoin's volatility in the context of its overall portfolio?

Operating Agreement or Bylaws. The governing document for the entity, encoding the governance framework discussed above. This should be drafted by an attorney who understands both family office governance and Bitcoin custody mechanics.

Service agreements. Contracts with any third parties involved in the family office's Bitcoin operations: custodians, collaborative custody providers, tax advisors, legal counsel, technical consultants. Each agreement should clearly define roles, responsibilities, liability, and — critically — what happens to Bitcoin held or managed by the service provider if the relationship terminates.

Phase Five: Operational Readiness

The final phase before the family office is fully operational is establishing the day-to-day processes that keep everything running.

Monitoring and reporting. The family office should have systems for monitoring on-chain activity across all wallets, tracking portfolio valuation in real time, and generating regular reports for family members and governance bodies. The sophistication of these systems should match the scale of the holdings — a family with a few hundred Bitcoin can manage with relatively simple tools, while a family with thousands may need institutional-grade monitoring.

Security operations. Physical security for key storage locations. Cybersecurity for any connected devices involved in the custody chain. Personal security for family members whose Bitcoin wealth is publicly known or could be discovered. This is an area where families often underinvest, sometimes with severe consequences. The security budget should be proportional to the value being protected.

Compliance calendar. Quarterly estimated tax payments. Annual filings. FBAR reporting for any foreign accounts or custodians. State-specific obligations. FinCEN reporting if applicable. The compliance requirements for Bitcoin are evolving rapidly, and missing a deadline can create penalties disproportionate to the oversight.

Advisor coordination. A Bitcoin-native family office typically works with multiple specialized advisors: a Bitcoin-knowledgeable CPA, an estate planning attorney, a custody consultant, and potentially a security consultant. These advisors need to be coordinated — the tax strategy should be consistent with the custody architecture, the estate plan should be consistent with the governance framework, and all of it should be consistent with the family's goals and values.

A family office is not a collection of services. It is a system. The value is in the integration, not the components.

The Timeline

Families often ask how long this process takes. The honest answer is: it depends on complexity, but a reasonable timeline for a family starting from a position of significant Bitcoin holdings and basic self-custody is:

Months 1-2: Audit and assessment. Comprehensive documentation of all holdings, cost bases, and current arrangements.

Months 2-4: Entity formation and advisory team assembly. Establish the legal structure, engage specialized counsel and tax advisors.

Months 3-6: Custody architecture design and implementation. Design the multisig arrangement, acquire hardware, distribute keys, test thoroughly.

Months 4-8: Governance framework and legal documentation. Draft and adopt the operating agreement, investment policy statement, and service agreements.

Months 6-12: Operational build-out. Implement monitoring, reporting, compliance systems, and security protocols. Migrate holdings to the new custody arrangement.

Note that these phases overlap. The entire process typically takes 9-12 months from decision to full operational readiness. Trying to compress this timeline introduces risk. This is infrastructure that needs to be right, not fast.

The Compounding Advantage

We'll close with a thought on why this matters beyond the obvious.

Jeff Booth makes the observation that technology is inherently deflationary — it allows us to do more with less, which should drive prices down over time. The reason prices don't fall is that monetary expansion absorbs the deflationary benefit, effectively transferring the gains from technological progress from the general population to those closest to the money printer.

Bitcoin, with its fixed supply, is the first monetary technology that allows families to fully capture the deflationary benefit of technological progress. As the world gets better at producing goods and services — and it will, because that's what technology does — each unit of a fixed-supply money becomes worth more in real terms.

A family office built around this thesis isn't just protecting wealth from inflation. It's positioning the family to capture the economic benefit of human progress in a way that no previous generation could. The fixed supply of Bitcoin means that as the denominator stays constant while the world's productive capacity grows, the purchasing power of each Bitcoin increases.

This is the long game. And it requires long-game infrastructure.

The families that build that infrastructure now — carefully, thoughtfully, with the right expertise — are building something genuinely unprecedented: a wealth management system aligned with the direction of technological progress rather than fighting against it.

That alignment is not a guarantee of success. But it is a structural advantage. And structural advantages, compounded over generations, tend to be decisive.