diff --git a/key-wallet/src/managed_account/managed_core_funds_account.rs b/key-wallet/src/managed_account/managed_core_funds_account.rs
index 474b725aa..da4c2c13a 100644
--- a/key-wallet/src/managed_account/managed_core_funds_account.rs
+++ b/key-wallet/src/managed_account/managed_core_funds_account.rs
@@ -242,6 +242,18 @@ impl ManagedCoreFundsAccount {
                             utxo.is_instantlocked =
                                 matches!(context, TransactionContext::InstantSend(_));
                             utxo.is_trusted = is_trusted_output;
+                            // Reprocessing (e.g. mempool→block) rebuilds this UTXO from
+                            // scratch, so carry forward flags that must not regress. An
+                            // InstantSend lock is permanent for a txid (DIP-0010) and
+                            // trust only ever settles, so both latch monotonically. A
+                            // coin reservation is orthogonal to chain context and is kept
+                            // as-is. `is_confirmed` stays freshly derived so a reorg can
+                            // still downgrade it.
+                            if let Some(prior) = self.utxos.get(&outpoint) {
+                                utxo.is_instantlocked |= prior.is_instantlocked;
+                                utxo.is_trusted |= prior.is_trusted;
+                                utxo.is_locked = prior.is_locked;
+                            }
                             self.utxos.insert(outpoint, utxo);
                             utxos_changed = true;
                         }
diff --git a/key-wallet/src/transaction_checking/wallet_checker.rs b/key-wallet/src/transaction_checking/wallet_checker.rs
index 209930457..65469b561 100644
--- a/key-wallet/src/transaction_checking/wallet_checker.rs
+++ b/key-wallet/src/transaction_checking/wallet_checker.rs
@@ -958,6 +958,8 @@ mod tests {
         assert!(ctx.transaction(&txid).is_confirmed());
         assert_eq!(ctx.transaction(&txid).height(), Some(1000));
         assert!(ctx.first_utxo().is_confirmed);
+        // The earlier IS lock must survive the mempool→block reprocess.
+        assert!(ctx.first_utxo().is_instantlocked, "IS-lock flag must not be lost on confirmation");
         assert_eq!(ctx.managed_wallet.balance.spendable(), 200_000);
 
         // Stage 4: chain-locked block (rescan with stronger context)