The single-sig problem
In a single-signature wallet, one seed phrase controls everything. If it is destroyed in a fire, the Bitcoin is gone. If it is photographed, the Bitcoin is gone. If you die without a recovery path, the Bitcoin is gone. Every backup you create to protect against loss increases the surface area for theft, and every step you take to protect against theft increases the chance of loss.
That trade-off is unavoidable with one key. It disappears with several.
How multisig works
A multisignature wallet is defined by a quorum: M of N. A 2-of-3 wallet has three independent keys, and any two of them can sign a transaction. No single key can move anything. Losing one key is a non-event - you still have two, and you rotate to a fresh set at your convenience.
Crucially, all three keys are real Bitcoin keys held in different places, ideally on different hardware from different manufacturers, in different physical locations, and sometimes with different people.
The classic 2-of-3 estate structure
Key one sits with you, on a hardware device you use for everyday signing. Key two sits in geographically separate secure storage - a bank deposit box or a safe at another property - as your personal backup. Key three sits with a professional collaborative custody partner who holds it purely as a signing agent and can never move funds alone.
Day to day, you sign with keys one and two. If you die, your executor works with the professional partner and whichever of your keys the estate can recover. If your house burns down, keys two and three rebuild the wallet. If the professional partner disappears, keys one and two still work.
When to use 3-of-5
For very large holdings, or where several family members or entities need to be involved, 3-of-5 adds redundancy at the cost of operational complexity. Three of five signatures are required, so two keys can be lost or compromised without consequence.
The trade-off is real: more keys means more devices to maintain, more backups to verify, and a longer recovery rehearsal. Most families are better served by a well-rehearsed 2-of-3 than a theoretical 3-of-5 nobody has ever tested.
The descriptor is as important as the keys
A multisig wallet cannot be recovered from seed phrases alone. You also need the wallet descriptor or output descriptor - the record of the quorum, the extended public keys, and the derivation paths. Lose the descriptor and you may hold every key and still be unable to reconstruct the wallet.
The descriptor contains no spending power, so it should be backed up widely: with each key location, with your solicitor, and inside the executor briefing. Backing up the descriptor generously is one of the cheapest risk reductions available.