Digital Assets in a Trust: What Successor Trustees Must Know

Your parent's trust may include Bitcoin, Ethereum, exchange accounts, or NFTs — and unlike bank accounts or brokerage accounts, digital assets can be permanently inaccessible if the trustee doesn't know where to look or the private keys are lost. This guide covers how to find digital assets, establish your legal authority to access them, value them for estate purposes, and handle the unusual tax rules that apply.

What counts as a digital asset in a trust

For trust administration purposes, digital assets include:

• Cryptocurrency on exchanges — Bitcoin, Ethereum, or other coins held in an account at Coinbase, Kraken, Gemini, Binance.US, or similar centralized exchanges. These work like brokerage accounts: the exchange holds the assets and can be accessed with the right credentials and legal documentation.
• Self-custodied cryptocurrency — assets stored in a software wallet (e.g., MetaMask, Exodus, Electrum) or hardware wallet (Ledger, Trezor) where the owner held their own private keys. No institution holds these assets; only the private key or seed phrase unlocks them.
• NFTs (non-fungible tokens) — digital collectibles or art stored on a blockchain. Valued differently than fungible crypto; may have a market but can also be illiquid.
• Digital brokerage accounts — standard brokerage accounts accessed online. Treated like any other brokerage; not fundamentally different from the paper account era, just accessed digitally.
• Online bank accounts — accounts at online-only banks (Ally, Marcus, SoFi, etc.) that have no physical branch. Treated like any bank account but requires coordinating with the institution online or by phone.
• Cryptocurrency held inside an IRA — Bitcoin IRAs and crypto IRAs held at specialty custodians (iTrustCapital, Bitcoin IRA, etc.). These are IRAs, not trust assets, and follow IRA rules — specifically, they are income in respect of a decedent (IRD) with no step-up in basis. Discussed separately below.

Your legal authority to access digital assets: RUFADAA

Before 2015, there was no clear legal framework allowing fiduciaries to access a deceased person's digital accounts. The federal Computer Fraud and Abuse Act and the Stored Communications Act both created legal ambiguity about whether even a properly authorized executor or trustee could access accounts without risking criminal exposure.

The Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA), now adopted by 46 states, resolves this.¹ Under RUFADAA, a successor trustee has the legal right to access and manage digital assets held in trust — with access governed by a three-tier priority system:

1. Online tool (highest priority): If the platform provides a digital legacy or inactive account management tool — Google's Inactive Account Manager, Apple's Digital Legacy program, Facebook's Legacy Contact — that designation controls. If the settlor used these tools and named someone, that person has first access.
2. Legal document (second priority): If no online tool was used, the trust document or a durable power of attorney controls. Explicit language in the trust authorizing the trustee to access digital accounts is the most effective form; many modern trusts include this language. If the trust is silent, you may still have authority under state RUFADAA enactment, but explicit language is cleaner.
3. Terms of service (default, lowest priority): If neither of the above applies, the platform's own terms of service govern. Most major platforms' default terms do not permit account access by anyone other than the account holder — which, under RUFADAA, means access may be denied absent the legal document layer.

Practical implication: When you contact an exchange or digital platform as successor trustee, present your Certificate of Trust (or trust certification under UTC § 1013) along with a death certificate. Major exchanges have estate/fiduciary departments familiar with RUFADAA requests. Expect processing times of 2–6 weeks at large exchanges; document your requests in writing.

If the settlor was in a state that has not adopted RUFADAA (currently Massachusetts, Oklahoma, and Louisiana), consult an estate attorney about state-specific alternatives before proceeding.

Step 1: Finding digital assets

You cannot administer what you can't find. Digital assets leave paper trails if you know where to look:

Search financial and email records

• Search the decedent's email for messages from Coinbase, Kraken, Gemini, Binance, Robinhood (crypto), PayPal (crypto), Venmo, or Cash App. Account confirmation emails, monthly statements, and tax notices (1099-DA, 1099-B) all indicate accounts.
• Review bank statements for transfers to or from known exchange addresses. Exchanges use ACH transfers with recognizable names.
• Check tax returns (Form 1040) for Schedule D or Form 8949 entries reporting cryptocurrency sales, and for the digital asset question on the front page of the 1040 ("at any time during [year], did you receive, sell, exchange, or otherwise dispose of any digital asset?"). An answer of "yes" confirms prior activity.
• Look for Form 1099-DA (starting with 2025 transactions reported in early 2026) or prior-year 1099-B entries from exchanges.

Look for hardware wallets and seed phrases

A hardware wallet is a small USB-like device (Ledger Nano, Trezor Model T) that stores cryptocurrency private keys offline. They look like flash drives and may be in a safe, a desk drawer, a safe deposit box, or a filing cabinet. If you find one, handle it carefully — do not initialize or reset it, which could erase the stored keys.

More critical than the device is the seed phrase (also called a recovery phrase or mnemonic): a sequence of 12–24 common English words written on a piece of paper, metal plate, or stored in a password manager. This phrase can reconstruct the wallet on any compatible device. Look for it:

• In fireproof safes or safe deposit boxes (often stored alongside traditional estate documents)
• In a password manager's notes (1Password, Bitwarden, LastPass, Dashlane)
• In personal files or notebooks labeled with names like "recovery," "wallet backup," or "seed"
• In emails or encrypted notes sent to themselves

If you find the hardware wallet but not the seed phrase, you may still be able to access it with the device PIN if the device is not wiped. Do not attempt to guess PINs — most hardware wallets permanently erase themselves after a limited number of failed attempts.

Check for paper wallets and old exchange accounts

Early Bitcoin adopters may hold paper wallets — a printed QR code containing a private key. These look like ordinary pieces of paper and could be mixed in with other documents. Also check for older or defunct exchanges through email search (Mt.Gox successor claims, for instance, are still being distributed).

Step 2: Securing and valuing digital assets

Once found, digital assets require immediate action to prevent loss:

• Exchange accounts: Contact the exchange's estate/fiduciary team as soon as possible to freeze the account pending transfer. Markets fluctuate; a Bitcoin account worth $200,000 today could drop significantly before you gain formal access.
• Self-custodied wallets: If you have found the seed phrase, consider transferring assets to a new wallet (one you control) or to an exchange account. Document every transfer with blockchain transaction hashes for the trust accounting records.
• Do not sell immediately without understanding the tax basis: The step-up rules described below may make a prompt sale highly tax-efficient. Sell before establishing basis and you'll have more work to do later.

Date-of-death valuation

Like publicly traded stocks, cryptocurrency must be valued at fair market value as of the date of death. The accepted approach — consistent with IRS stock valuation rules at 26 CFR § 20.2031-2 — is to use the mean of the high and low quoted prices on the date of death on a major exchange (Coinbase, Kraken, or similar).²

Cryptocurrencies trade 24/7 with no market close. Use the 24-hour high/low for the date of death in the settlement location's time zone. Document the source (e.g., Coinbase Pro historical data, CoinMarketCap API) and retain the records — you will need this for the trust's Form 1041, for beneficiary accounting, and potentially for an IRS audit years later.

Example: Bitcoin is at a 24-hour high of $102,400 and a low of $97,600 on the date of death. The date-of-death value is ($102,400 + $97,600) / 2 = $100,000 per Bitcoin. If the trust holds 2.5 BTC, the date-of-death value is $250,000.

Step 3: Step-up in basis and tax treatment

The IRS classifies cryptocurrency as property, not currency, under IRS Notice 2014-21.³ This has a critical implication for successor trustees: cryptocurrency held in the trust receives a step-up in basis to fair market value at the date of the settlor's death, just like stocks and real estate.⁴

Example: The settlor bought 5 Bitcoin in 2019 for $8,000 total ($1,600/BTC). At death, Bitcoin is worth $100,000. The 5 BTC had a pre-death embedded gain of $492,000. After death, the trust's basis in the 5 BTC steps up to $500,000 (5 × $100,000). If the trustee sells for $500,000, the taxable gain is zero.

This is one of the most valuable aspects of trust administration. Cryptocurrency held for decades with enormous embedded gains can often be sold promptly after death with minimal or no capital gains tax. The longer the trustee waits to sell, the more any post-death appreciation becomes taxable.

Capital gains rates for trusts in 2026

If the trust sells cryptocurrency at a gain above the stepped-up basis, the gain is subject to trust-level capital gains rates — which compress much faster than individual rates:

• 0% rate: long-term capital gains up to $3,300⁵
• 15% rate: gains from $3,300 to $16,250⁵
• 20% rate: gains above $16,250⁵
• Net Investment Income Tax (NIIT): an additional 3.8% on net investment income above the ~$16,050 ordinary income threshold⁶

A trust retaining post-death crypto gains above $16,250 pays 23.8% federal tax (20% + 3.8% NIIT) — reaching the top rate at an income level an individual reaches only above $583,750 (single) or $1,000,000 (married filing jointly). This strongly reinforces distributing gains to beneficiaries in lower brackets where the trust document permits. See our distribution decisions guide and Form 1041 guide for how to structure distributions to shift gains.

Cryptocurrency held in an IRA: no step-up

If the settlor held cryptocurrency inside a traditional IRA or Roth IRA — at a specialty custodian like iTrustCapital, Bitcoin IRA, or a SDIRA — those accounts are not trust assets and do not receive a step-up in basis.

Traditional crypto IRA balances are income in respect of a decedent (IRD): they pass to named beneficiaries (not through the trust), and every dollar of distribution is taxable as ordinary income to the recipient. A beneficiary who inherits a $500,000 Bitcoin IRA and withdraws the full balance in one year may face the top marginal ordinary income rate on most of it. See our IRAs and trusts guide for how inherited IRAs are taxed and the 10-year rule under SECURE 2.0.

Roth IRA crypto is different — distributions are generally tax-free to qualified beneficiaries, and gains are not taxed — but the same no-step-up rule applies, and the 10-year distribution rule still applies for non-spouse beneficiaries.

NFTs and other digital collectibles

Non-fungible tokens are taxed as property like cryptocurrency but present additional valuation challenges. There is no liquid market comparable to Bitcoin exchanges, and NFT values can be highly volatile or illiquid. As trustee:

• Document the NFT's date-of-death value using the most recent comparable sale on the relevant marketplace (OpenSea, Blur, Foundation). If no comparable sale exists within 30 days of death, a qualified appraisal from someone familiar with the NFT market may be necessary.
• Verify that the wallet containing the NFT is accessible. Like cryptocurrency, an NFT stored in a self-custodied wallet is unrecoverable without the private key or seed phrase.
• The IRS may treat high-value NFT collectibles as capital assets subject to the 28% collectibles rate if they qualify as collectibles under IRC § 408(m) — guidance is evolving. Consult with a CPA who handles digital assets before selling high-value NFTs.

Form 1099-DA: new broker reporting starting in 2026

The IRS finalized regulations under IRC § 6045 requiring digital asset brokers to report transactions to both the IRS and customers using the new Form 1099-DA.⁷ The phased rollout:

• 2025 transactions (first forms issued January 2026): Brokers must report gross proceeds. Cost basis reporting is optional for 2025.
• 2026 transactions and beyond: Brokers must report both gross proceeds and cost basis for "covered" digital assets.

For a successor trustee administering crypto accounts in 2026, you should expect to receive Form 1099-DA for any sales made during the administration period. The form will report gross proceeds from the sale; the trust's stepped-up basis must be reported separately on the trust's Form 1041 Schedule D. Your CPA will need documentation of the date-of-death value to correctly compute the trust's gain or loss.

Also note: starting in 2025, the IRS eliminated the "universal wallet" cost basis method that pooled similar assets across all accounts. Trustees must now use the wallet-by-wallet method, tracking cost basis separately within each account or wallet.⁸ For a trust that acquires crypto through a step-up, this is straightforward — the stepped-up basis applies to each asset at the account level. But if the trust later purchases additional crypto and mingles it with stepped-up assets, you'll need to track these lots separately.

Practical timeline for the trustee

Digital assets should be handled on a compressed timeline relative to other trust assets, because markets move and access windows can close:

1. Days 1–7: Search email and financial records for evidence of exchange accounts. Look for hardware wallets, seed phrases, and paper wallets in the decedent's physical papers and safes. Photograph and document everything found.
2. Days 7–14: Contact exchanges with death certificate and trustee credentials to freeze accounts and begin the estate access process. Confirm RUFADAA authority in your state.
3. Days 14–60: Obtain formal access, document date-of-death values for all assets found, transfer to trustee-controlled accounts, and assess sell vs. hold vs. distribute-in-kind options.
4. Before year-end: Coordinate with CPA on whether any post-death gains can be distributed to beneficiaries in lower tax brackets, and whether the 65-day election under IRC § 663(b) is available to distribute income taxed at trust rates.

When to involve a financial advisor and other professionals

Digital asset administration touches multiple domains:

• Estate attorney: Confirm your RUFADAA authority, especially for self-custodied wallets where no institutional intermediary exists. An attorney may need to draft a court petition if access is contested.
• CPA with digital asset experience: Date-of-death valuation documentation, Form 1041 Schedule D reporting, 1099-DA reconciliation, and basis tracking going forward all require a CPA who understands blockchain records. Not all estate CPAs are current on digital asset rules.
• Fee-only financial advisor: Sell vs. hold vs. distribute analysis — modeling the after-tax outcome of selling at stepped-up basis now (likely low or zero gain) versus holding while the asset appreciates and the trust incurs capital gains at compressed rates. A fee-only advisor has no incentive to recommend holding because they earn more on assets under management.
• Digital asset recovery specialist: If a hardware wallet or private key has been found but access is uncertain, professional recovery services exist. Retain one only after consulting an attorney about chain-of-custody documentation — improper handling can raise liability issues with beneficiaries.

Sources

1. Uniform Law Commission — Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA). Adopted by 46 states as of 2025. Establishes three-tier priority: online tool > legal document > terms of service for fiduciary access to digital accounts.
2. 26 CFR § 20.2031-2 — Valuation of stocks and bonds. Mean of high/low quoted prices on the date of death; applied by analogy to publicly traded digital assets. For crypto, use the 24-hour high/low on the date of death from a major exchange.
3. IRS Notice 2014-21 — IRS Virtual Currency Guidance. Cryptocurrency is property, not currency, for federal tax purposes. General tax principles applicable to property transactions apply to virtual currency transactions.
4. IRC § 1014 — Basis of property acquired from a decedent. Basis of property acquired from a decedent is the fair market value at date of death. Applies to cryptocurrency as property per IRS Notice 2014-21.
5. IRS Form 1041-ES (2026); IRS Rev. Proc. 2025-32. Trust long-term capital gains rate brackets for 2026: 0% ≤ $3,300; 15% $3,300–$16,250; 20% above $16,250.
6. IRS — Net Investment Income Tax (IRC § 1411). 3.8% NIIT on undistributed net investment income of trusts above the ordinary income 39.6% threshold (~$16,050 for 2026).
7. IRS Instructions for Form 1099-DA (2026). Brokers must report gross proceeds for digital asset transactions effected on or after January 1, 2025; basis reporting required for covered transactions on or after January 1, 2026.
8. IRS — Final Regulations for Digital Asset Broker Reporting (T.D. 10000, July 2024). Wallet-by-wallet cost basis method required starting 2025; universal wallet method no longer permitted.

Tax values verified as of May 2026. RUFADAA adoption status per Uniform Law Commission. Consult your CPA, estate attorney, and financial advisor for advice specific to your trust and state law.