Why Your Charitable Remainder Trust Can’t Hold Crypto Directly (And What To Do About It) #
Charitable remainder trusts are one of those structures that sound complicated but solve a real problem. You have an asset that’s appreciated significantly. You want to support a charity. You also wouldn’t mind some income while you’re still alive. A CRT lets you do all three and dodge Capital Gains in the process.
Here’s how it works. You transfer appreciated assets into the trust. The trust sells them without triggering immediate Capital Gains tax because the trust itself is tax-exempt. The trust then pays you (or whoever you designate) income for a set period or for life. When the trust term ends, whatever’s left goes to the charity you named. You get a partial tax deduction up front based on the projected remainder value.
This works beautifully with stock, Real Estate, and other traditional assets. Crypto is where things get messy.
Most charitable remainder trusts cannot hold Cryptocurrency directly. The issue is custodial. Trust law requires certain Custody arrangements, and most trust custodians aren’t set up to hold digital assets. They don’t have the infrastructure, the Insurance, or the regulatory clarity to Custody Bitcoin or Ethereum directly. So even though there’s nothing in the tax code preventing a CRT from holding crypto, the practical execution hits a wall.
The workaround is an LLC wrapper. You create an LLC, transfer the crypto into the LLC, then transfer the LLC membership interest into the CRT. The trust now owns the LLC, and the LLC holds the crypto. This satisfies the Custody requirements because the trust is holding a membership interest, which traditional custodians can handle. The LLC then manages the crypto assets according to the trust’s instructions.
It’s an extra layer, which means extra cost and complexity. But it’s currently the cleanest way to get appreciated crypto into a CRT structure without liquidating first and losing the tax advantage. If you sell the crypto before transferring it, you’ve already triggered Capital Gains. The whole point was to avoid that.
Now, this is exactly the kind of thing that requires coordination between your wealth management, your tax strategy, and your Estate Planning. A registered investment advisor can help structure your Portfolio and manage the assets once they’re in the trust. But setting up the LLC, navigating the Custody requirements, and making sure the trust document is written correctly requires specialized knowledge.
Digital Wealth Partners handles the wealth management and investment advisory side of this. They’ll manage the assets, coordinate with your Tax Planning, and make sure your Portfolio aligns with your income needs from the trust. For straightforward situations where you’re setting up a single CRT with clear beneficiaries, that’s typically sufficient.
But if you’re running multiple trusts, coordinating across generations, dealing with complex estate structures, or trying to integrate this with a broader philanthropic strategy, you need Family Office level coordination. Digital Ascension Group manages that complexity. They’re handling the tax strategy oversight, the estate and succession coordination, and the multi-generational planning that makes sure your charitable structures work with everything else you’re building.
The difference matters when you’re dealing with assets that don’t fit neatly into traditional boxes. Crypto Custody rules will probably get clearer over time. Until then, you need people who know how to structure around the current limitations.
Contact Digital Ascension Group to learn how our Family Office services can coordinate your complete financial picture.
