Estate Planning · September 23, 2026 · 12 min read · By CryptoTaxCalc Team

Crypto in Trusts and Estates: Passing Down Bitcoin in 7 Countries

Trusts, step-up in basis, compressed tax brackets, and the quiet administrative nightmare of tracking basis across wallets and heirs. Here's how the US, UK, Germany, Canada, Australia, Japan and India actually tax crypto held inside a trust or estate structure — and where each country quietly punishes you.

Image: Illustrative purposes. Tax rules cited from IRS Pub 559 and IRC §1014, HMRC Trusts and Estates manual, BMF letter of 10 May 2022, CRA Folio S5-F3-C1, ATO ITAA 1997, NTA Inheritance Tax Act, Indian Income Tax Act §2(47A).

The cold-sweat moment hit my friend Dave on a Tuesday night. He'd been holding 4 BTC since 2014, bought at $380 each, and he was now sitting on a position worth more dead than alive from a tax perspective. His wife didn't have the seed phrase. His will didn't mention the wallet. And his estate lawyer — good guy, does great work with houses — had never heard of a hardware wallet.

"I just realised," he said, "if I get hit by a bus tomorrow, my family loses the coins and the IRS loses track of the basis. Everyone loses."

That conversation is why I wrote this. Crypto in an estate is uniquely messy because it's the only asset class where the asset itself can vanish (lost keys) and the cost basis can be impossible to reconstruct (no 1099, no brokerage statement). A trust — properly structured — fixes both problems. It also creates some new ones, which I'll get to. One quick note on scope: if you just inherited some coins and you're trying to figure out your own tax situation, start with our inheritance basics guide. Here, we're talking about deliberately structuring a trust or foundation to hold crypto during life and pass it cleanly at death. Different problem, different playbook.

Why a trust even makes sense for crypto — and when it doesn't

A trust solves three problems that crypto uniquely has.

Continuity of keys. A trust survives your death. The trustee — a person or a corporate fiduciary — holds the keys and has legal authority to act. Your widow doesn't need to guess at a seed phrase; she calls the trustee.

Continuity of basis records. Crypto tax is all about basis. If you die and nobody can find your 2017 exchange records, your heirs might inherit a $0 basis (worst case) and pay capital gains tax on the entire current value when they sell. A trust forces you to keep records in one place, by one person, for the trust's whole life. For the mechanics of how exchanges actually match trades to lots, our cost-basis FIFO explainer covers the waterfall in detail.

Control from the grave. You don't want your 19-year-old inheriting 50 BTC outright. A trust lets you drip it out — 10% at 25, half at 30, the rest at 35 — without the heir able to blow it all on a Lambo in week one.

But here's the trade-off. Trusts add cost: lawyer fees to set up, trustee fees every year, separate tax returns. For a holding below, say, $100k of crypto, a trust is probably overkill — a will with a clear letter of instruction about keys is enough. Above that threshold, the structure starts to pay for itself, especially if you're in a country where the trust gets favourable tax treatment.

Honestly, most people reading this don't need a trust yet. Most people need a will, a documented key-recovery plan, and an uncomfortable conversation with their family. But if you're sitting on life-changing crypto, keep reading.

The US: grantor trusts, §1014 step-up and the 37% bracket trap

The US is the friendliest major country for crypto estate planning, and also the most complicated. Two things make it friendly.

Revocable grantor trusts don't trigger tax during life. You transfer your BTC into a revocable trust; for tax purposes you still own it (IRC §676 — you have the power to revoke, so you're the owner). No gift, no disposal, no capital gains recognition. You continue to report any trades on your personal Schedule D exactly as before. The trust is just a legal container.

Death triggers a step-up in basis under IRC §1014. This is the big one. Whatever you paid for the BTC — $380 in 2014, say — is wiped clean at death. The new basis is the fair market value on the date of death. If BTC is at $200k when you die, your heirs' basis is $200k. They can sell the next day and owe zero federal capital gains tax on the lifetime appreciation. This single rule has saved more crypto families from ruin than any other provision in the tax code.

Now the trap.

If you set up an irrevocable non-grantor trust to remove the crypto from your estate (good for estate-tax planning above the ~$13.6 million lifetime exemption in 2026), the trust becomes its own taxpayer. Trust tax brackets are compressed — brutally. For 2026, the top 37% federal rate kicks in at roughly $15,000 of undistributed trust income. Compare that to an individual, who doesn't hit 37% until about $580,000 of income. Long-term capital gains use the same 0/15/20% brackets as individuals, but compressed: a trust hits the 20% LTCG bracket at around $15k of gains, plus the 3.8% Net Investment Income Tax on top.

So a non-grantor trust that realises $50k of long-term crypto gains pays 23.8% on most of it. The same gains on an individual return might pay 15%. That's a real dollar difference.

The workaround most estate lawyers use: distribute the gains to beneficiaries (who pay at their own, lower brackets) before year-end. Trusts get a deduction for distributions — push the income out, the trust doesn't pay tax on it. But this requires a trustee who's actually paying attention in November, not April. If your trustee is a family member who doesn't know what they're doing, the compressed brackets will bite.

One more US trap worth naming: the GST tax (generation-skipping transfer tax, IRC §2611). If your trust skips a generation — say, you leave crypto to your grandchildren with your kids skipped — there's an additional ~40% tax above a lifetime GST exemption that's roughly the same as the estate exemption (around $13.6 million in 2026). This catches people who set up "dynasty trust" structures without planning for GST.

The lesson, if you're in the US: a revocable grantor trust plus a clean step-up at death is the dream. An irrevocable non-grantor trust is a different beast — it removes assets from your estate but creates its own tax universe with compressed brackets. Don't set one up because a YouTube guru said "asset protection." Set one up because your estate is over the exemption and you've talked to an actual estate lawyer.

How seven countries tax crypto in trusts and estates

Let's put it side by side. The table below covers the countries that matter most for English-language crypto holders. The "step-up at death" column is the one to watch — it changes the entire planning calculus.

A few things to flag from the table.

The US is the only country with a genuinely free step-up at death. IRC §1014 resets basis to FMV, and below the ~$13.6M estate tax exemption, no tax is owed on the lifetime appreciation. Every other country either has no step-up (Australia, India) or has a "taxed step-up" where CGT or inheritance tax is charged on the death value before the basis resets (UK, Canada, Germany, Japan).

The UK is arguably the worst of both worlds for large holdings: a 20% inheritance tax entry charge on transfers above the nil-rate band, plus no free step-up at death. Canada is close behind — deemed disposition at death triggers capital gains tax on the spot, though only 50% of the gain is taxable, per CRA Folio S5-F3-C1.

Australia is quietly brutal in a different way: no step-up at all. The beneficiary inherits the deceased's original cost base. If dad bought BTC at $100 and it's worth $200k when he dies and you sell a year later at $210k, you pay CGT on $209,900 of gain. The ATO doesn't care that you didn't own the coin when most of that appreciation happened.

India, oddly, is the cleanest for inheritance itself — no inheritance tax since 1985. But the absence of inheritance tax doesn't mean tax-free; when the heir sells, they still face the 30% crypto disposal tax. We'll come back to each country's quirks below.

The UK quirk: no step-up at death, but a probate-value base

The UK trust system is its own world, and the HMRC Trusts and Estates manual is the source you want.

Here's the subtle bit that catches people. When someone dies in the UK, death is not a CGT chargeable event. The crypto isn't treated as sold at death. Instead, the beneficiary inherits the crypto at the probate value (which is FMV at the date of death) as their base cost for CGT.

So in a CGT sense, there IS a basis reset — to probate value. The "no step-up" framing means "no free step-up like the US," because inheritance tax was already charged on that same probate value: 40% above the £325,000 nil-rate band (and the residence nil-rate band if a home is involved, which it usually isn't for crypto).

The UK heir's position: they inherit at probate value as their base cost, but the estate already paid 40% IHT on the value above £325k. If they later sell at a higher price, they pay CGT at 20% on the gain above probate value. Two taxes on the same asset, at two different times.

For trusts specifically, transfers into a discretionary trust trigger a 20% inheritance tax entry charge above the nil-rate band. There are 10-year anniversary charges (up to 6%) and exit charges when assets leave the trust. Trust CGT applies at 20% on gains above the trust's annual exempt amount — which, since 2024, is about half the individual amount. The individual AEA is £3,000 for 2025/26, so the trust AEA is around £1,500. That's a small allowance before 20% kicks in.

The practical upshot: a UK crypto holder with a large position faces IHT at death (40% above £325k) and their heir gets a base cost equal to the probate value — not the original purchase price. That's better than inheriting at original basis (Australia), but worse than the US free step-up. UK planning often centres on getting assets below the nil-rate band during life via PETs (potentially exempt transfers — become exempt after 7 years) rather than trust structures.

Germany's Stiftung and the heir's 1-year ticket

Germany doesn't use trusts the way common-law countries do. The closest equivalent is the Stiftung — a foundation structure that can hold assets, including crypto, for a defined purpose or for the benefit of named persons. Stiftungen are governed by civil law (BGB §§80–88) and supervised by the Stiftungsaufsicht in each Land.

The Stiftung pays corporate income tax (~15% plus solidarity surcharge and local trade tax, call it 15.825% to 30% depending on the municipality) on its income. For private crypto held outside a Stiftung, the rule that matters is the §23 EStG speculative period — and this is where Germany becomes genuinely interesting for inherited crypto.

The BMF letter of 10 May 2022 confirmed that crypto is treated uniformly under §23 EStG: if you hold for 365 days or more, private sales are tax-free. And here's the heir's ticket — when someone inherits crypto, the heir's holding period continues from the deceased's purchase date. So if dad bought BTC in 2018 and died in 2026, the heir already has an 8-year holding period. They can sell the day after probate and the gain is tax-free under §23.

This is the one rule that makes Germany competitive with the US for crypto inheritance, even though Germany has no step-up at death (the heir steps into the deceased's basis). The heir pays Erbschaftsteuer (inheritance tax) on the FMV at death — rates from 7% to 50%, with allowances of €500,000 for a spouse and €400,000 per child — but once that's paid, the crypto itself can be sold tax-free if the 365-day rule is met.

For the full breakdown of how the 1-year rule works for buyers and heirs, I wrote a separate piece here. The short version: Germany is the only country where "hold and inherit" genuinely neutralises the capital gains tax on crypto, provided the holding period is already satisfied.

Erbschaftsteuer rates by relationship class: Class 1 (spouse, children, parents) pays 7–30%; Class 2 (siblings, nieces/nephews, unrelated persons) pays 30–50%. Crypto is valued at FMV at the date of death, which for volatile assets can produce strange outcomes — if BTC spikes on the day of death, the estate pays tax on a higher number.

The trustee's real job: tracking basis across wallets and heirs

Here's where the theory of trusts meets the reality of crypto. A trustee — especially a non-grantor trust trustee — has to actually file tax returns. Those returns require basis information. And crypto basis is the hardest thing in tax to reconstruct.

Consider a trust that holds BTC bought in five tranches across three exchanges and two self-custody wallets over six years. Then the settlor dies. The step-up (in the US) resets all five tranches to the date-of-death FMV — but only if the trustee can prove the coins existed and were held by the trust on that date. Miss the proof, and the IRS defaults to a $0 basis.

Then the trust distributes coins to three different heirs, each at different times. Each heir now has their own lot history starting from the step-up basis. When heir #2 sells two years later, their basis is the step-up value — but only if the trustee kept records that chain from the original exchange purchases through trust acquisition, through date of death, through distribution to heir #2.

This is the part that breaks. Most trustees are not crypto-native. They're lawyers, accountants, or family members who got handed a Ledger and a folder of PDFs. The ones who do it well build a single source-of-truth spreadsheet (or use a tool) that tracks every acquisition (exchange, date, price, USD value, wallet moved to), the date-of-death FMV (or the date of distribution FMV if it's an irrevocable trust funded during life), and which heir received which lot, on what date, at what basis.

The free calculator on this site handles the gain math once you have the lots entered. For trustees juggling dozens of wallets and hundreds of transfers, the cost-basis FIFO engine can import CSVs and match lots under US FIFO, UK same-day-and-30-day, German FIFO, and other rules. It runs in the browser, no data leaves the machine — which matters when you're talking about a family's entire crypto wealth.

One habit that pays for itself: the trustee should harvest losses inside the trust before year-end, especially in a non-grantor trust where compressed brackets make gains expensive. The tax-loss harvesting calculator works for trust holdings the same way it works for individuals — you enter the lots, it identifies which sales would offset gains and which would trigger wash-sale-adjacent positions (the IRS doesn't enforce wash sale on crypto yet, but that's changing).

Honestly, the biggest failure mode I see is not the tax law — it's the record-keeping. A trust with perfect structure and missing basis records is worse than no trust at all, because the trustee has a fiduciary duty to file accurate returns and can be personally liable for getting it wrong.

Bottom line

US holders: a revocable grantor trust plus the §1014 step-up is the best deal in crypto estate planning. Just make sure the trustee has the keys and the records. Anyone considering an irrevocable non-grantor trust should talk to an estate lawyer about the compressed brackets and the GST tax before moving a single coin.

In the UK, focus on potentially exempt transfers (the 7-year survival rule) rather than trust structures — the IHT entry charge and 10-year anniversary charges make trusts expensive for crypto. Germany's Stiftung is a real option for large holdings, but the bigger win is the §23 EStG 1-year rule for inherited coins. Canada's deemed disposition at death means you should plan for the tax bill (life insurance is the common funding mechanism). Australia's no-step-up rule means the heir inherits the full gain — plan for it. Japan's 55% top inheritance rate and India's 30% disposal tax both reward holding rather than selling.

The common thread across all seven countries: the trust structure matters less than the records. Get the keys documented, get the basis documented, and have the conversation with your family before someone has to have it for you.

General information, not tax advice. Trust and estate tax rules are complex and country-specific — the US GST exemption, UK nil-rate bands, German Erbschaftsteuer classes and Canadian GRE rules all have details that change with legislation. For significant amounts, talk to an estate lawyer and tax professional in your country.

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