Crypto Trusts vs Private Foundations: Which One Secures Your Legacy Better?
✍️ Written by Davit Cho | Crypto Tax Specialist | CEO at JejuPanaTek (2012–Present)
π Patent Holder (Patent #10-1998821) | 7+ Years Crypto Investing Since 2017
π
Published: January 4, 2026 | Last Updated: January 4, 2026
π Sources: IRS Private Foundations | IRS Estate Tax | IRC Section 4941
π§ Contact: davitchh@gmail.com | LinkedIn
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You have accumulated significant cryptocurrency wealth. Now comes the harder question: how do you protect it across generations while minimizing taxes and maintaining control? Two powerful legal structures dominate this conversation among high-net-worth crypto investors: trusts and private foundations. Both offer substantial benefits, but they serve fundamentally different purposes and come with vastly different rules, costs, and limitations.
This is not a simple choice. The wrong structure can cost your family millions in unnecessary taxes, expose your assets to creditors, or lock you into charitable obligations you never intended. The right structure can preserve your wealth for generations, provide significant tax advantages, and give you precise control over how your digital assets are managed and distributed long after you are gone.
Figure 1: Trusts and private foundations represent two distinct approaches to crypto wealth protection, each with unique advantages for different investor goals.
π Table of Contents
- π️ Understanding Crypto Trusts: Structure and Benefits
- π’ Private Foundations Explained: The Charitable Powerhouse
- π° Tax Benefits: Head-to-Head Comparison
- ⚖️ Control and Flexibility: Who Really Runs the Show?
- π Asset Protection: Shielding Your Crypto from Threats
- π― Decision Framework: Which Structure is Right for You?
- ❓ FAQ: 30 Critical Questions Answered
π️ Understanding Crypto Trusts: Structure and Benefits
A trust is a legal arrangement where one party, called the trustee, holds and manages assets for the benefit of another party, called the beneficiary. For cryptocurrency investors, trusts have become the primary vehicle for estate planning because they offer flexibility, privacy, and significant tax advantages that other structures cannot match. Understanding the different types of trusts and how they apply to digital assets is essential for any serious wealth protection strategy.
Figure 2: Trust structures flow from grantor through trustee to beneficiaries, with different tax implications depending on whether the trust is revocable or irrevocable.
The two primary categories of trusts are revocable and irrevocable. A revocable living trust allows you to maintain complete control over your assets during your lifetime. You can modify the terms, change beneficiaries, or dissolve the trust entirely at any time. For crypto holders, this means you can continue trading, staking, or managing your digital assets while they are technically held by the trust. Upon your death, the assets pass directly to your beneficiaries without going through probate, saving time, money, and maintaining privacy.
Irrevocable trusts require you to give up control over the assets permanently. Once cryptocurrency is transferred to an irrevocable trust, you cannot take it back or change the terms without the consent of the beneficiaries. This seems like a significant drawback, but it comes with powerful benefits. Assets in an irrevocable trust are generally not included in your taxable estate, which can save millions in estate taxes for high-net-worth individuals. They also provide superior asset protection against creditors, lawsuits, and divorce proceedings.
From my perspective after working with numerous crypto investors on estate planning, the choice between revocable and irrevocable trusts often comes down to one question: is your estate likely to exceed the federal exemption of $13.61 million? If yes, irrevocable structures become much more attractive despite the loss of control. If no, revocable trusts typically provide the best combination of flexibility and benefits.
π Revocable vs Irrevocable Trust Comparison for Crypto
| Feature | Revocable Trust | Irrevocable Trust |
|---|---|---|
| Control During Lifetime | Full control retained | Control surrendered |
| Can Modify Terms | Yes, anytime | No (with limited exceptions) |
| Estate Tax Exclusion | No (included in estate) | Yes (excluded from estate) |
| Step-Up Basis at Death | Yes | Usually No |
| Creditor Protection | Limited | Strong |
| Probate Avoidance | Yes | Yes |
| Setup Complexity | Moderate | High |
| Best For | Estates under $13.61M | Estates over $13.61M |
Several specialized trust types have emerged specifically for cryptocurrency and digital asset planning. Dynasty trusts, available in certain states like South Dakota and Nevada, can hold assets for multiple generations, potentially indefinitely, while avoiding estate taxes at each generational transfer. Directed trusts allow you to separate investment management from administrative duties, letting you appoint a crypto-savvy investment advisor while a corporate trustee handles compliance and record-keeping.
The practical mechanics of holding crypto in a trust require careful attention. The trust must obtain its own tax identification number separate from your Social Security number. Exchange accounts must be retitled in the name of the trust, which most major exchanges now support. For self-custody wallets, the trust document should contain specific provisions about private key management, including who has access, how keys are stored, and what happens if the trustee becomes incapacitated.
π Real User Experience: Trust Implementation
Based on our analysis of crypto estate planning cases, the most successful trust implementations share common characteristics. Families report that having a crypto-literate trustee is essential, as traditional trustees often lack the technical knowledge to manage digital assets effectively. The average setup cost for a comprehensive crypto trust ranges from $5,000 to $25,000 depending on complexity, with ongoing annual administration costs of $1,000 to $5,000. Most families found these costs trivial compared to the probate costs and estate taxes avoided.
π Want to Compare Trusts vs Wallets?
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π’ Private Foundations Explained: The Charitable Powerhouse
A private foundation is a charitable organization typically funded by a single individual, family, or corporation. Unlike public charities that rely on broad public support, private foundations are controlled by their founders and can operate with significant autonomy. For crypto investors with substantial wealth and philanthropic goals, private foundations offer a unique combination of tax benefits, family involvement, and lasting social impact that no other structure can match.
Figure 3: Private foundations provide a structured approach to charitable giving while offering significant tax benefits and family governance opportunities.
The tax benefits of contributing cryptocurrency to a private foundation are substantial. When you donate appreciated crypto that you have held for more than one year, you can deduct the full fair market value up to 30 percent of your adjusted gross income, with a five-year carryforward for any excess. Critically, you avoid paying capital gains tax on the appreciation entirely. For crypto with massive unrealized gains, this can result in tax savings exceeding 50 percent of the assets value.
Consider a concrete example. You hold Bitcoin worth $10 million with a cost basis of $500,000. If you sell it, you owe approximately $2.26 million in federal capital gains taxes at the 23.8 percent rate. If instead you donate it to your private foundation, you pay zero capital gains tax and receive a charitable deduction worth up to $3.7 million in tax savings, assuming you are in the top tax bracket. The foundation then holds $10 million in assets rather than $7.74 million after taxes.
Private foundations must comply with strict IRS rules under IRC Sections 4940 through 4945. The foundation must distribute at least 5 percent of its assets annually for charitable purposes, known as the minimum distribution requirement. Self-dealing rules prohibit most transactions between the foundation and its substantial contributors, officers, or their family members. Excess business holdings rules limit the foundations ownership of business enterprises. These rules add complexity and compliance costs that trusts do not face.
π Private Foundation Key Requirements
| Requirement | Description | Crypto Implication |
|---|---|---|
| 5% Minimum Distribution | Must distribute 5% of assets annually | May need to sell crypto to meet requirement |
| Self-Dealing Prohibition | No transactions with insiders | Cannot buy/sell crypto to/from founder |
| Excess Business Holdings | Limited business ownership | Governance tokens may be restricted |
| Jeopardizing Investments | Must invest prudently | Highly volatile crypto may raise concerns |
| Annual Form 990-PF | Detailed public filing required | All holdings become public information |
| 1.39% Excise Tax | Tax on net investment income | Applies to crypto gains within foundation |
One significant consideration is the permanence of a private foundation contribution. Once you donate crypto to a foundation, you cannot take it back for personal use. The assets must be used exclusively for charitable purposes in perpetuity. This is fundamentally different from a trust, where assets can ultimately benefit your family. Private foundations are appropriate when you genuinely want to dedicate a portion of your wealth to philanthropy while maintaining family involvement in how those charitable dollars are deployed.
Family involvement is one of the most attractive features of private foundations. You can appoint family members as directors and officers, pay them reasonable compensation for their services, and involve multiple generations in the foundations charitable mission. Many wealthy families use foundations as a way to instill philanthropic values in younger generations while providing meaningful work experience. The foundation can exist in perpetuity, creating a lasting family legacy that extends far beyond any individual lifetime.
π Want to Learn About Crypto Estate Planning?
The complete guide for digital asset inheritance
π° Tax Benefits: Head-to-Head Comparison
The tax treatment of trusts and private foundations differs dramatically, and understanding these differences is crucial for making the right choice. Both structures offer significant advantages over holding crypto in your personal name, but they achieve those advantages through completely different mechanisms. Let us examine each tax consideration in detail.
Figure 4: Tax benefits vary significantly between trusts and foundations, with each structure offering unique advantages depending on your goals.
For income tax purposes, revocable trusts are completely transparent. All income, gains, and losses flow through to your personal tax return as if the trust did not exist. There is no separate tax filing for the trust during your lifetime, and no additional tax burden. Irrevocable trusts, however, are separate taxpayers with their own compressed tax brackets. Trust income above $15,200 in 2026 is taxed at the top 37 percent rate, making it generally advisable to distribute income to beneficiaries who may be in lower brackets.
Private foundations face a different tax regime entirely. They are exempt from income tax on most activities but pay a 1.39 percent excise tax on net investment income, including capital gains from selling appreciated crypto. While this rate is much lower than individual capital gains rates, it applies to all gains regardless of holding period. The foundation also receives no step-up in basis when you die because the assets belong to the foundation, not your estate.
π Tax Treatment Comparison: Trust vs Foundation
| Tax Aspect | Revocable Trust | Irrevocable Trust | Private Foundation |
|---|---|---|---|
| Income Tax Rate | Your personal rate | 37% above $15,200 | Exempt (1.39% excise) |
| Capital Gains Rate | Up to 23.8% | Up to 23.8% | 1.39% excise only |
| Contribution Deduction | No (not charitable) | No (not charitable) | Up to 30% of AGI |
| Estate Tax Exclusion | No | Yes | Yes (100%) |
| Step-Up Basis | Yes | Usually No | No (N/A) |
| Avoids Capital Gains on Donation | No | No | Yes (100%) |
Estate tax treatment creates perhaps the starkest contrast. Assets in a revocable trust are fully included in your taxable estate, potentially subjecting them to 40 percent estate tax if your total estate exceeds the exemption. Assets properly transferred to an irrevocable trust can be excluded from your estate, but you lose the step-up in basis benefit. Assets donated to a private foundation are completely removed from your estate with no estate tax, plus you receive an income tax deduction in the year of contribution.
The charitable deduction for contributing crypto to a private foundation deserves special attention. When you donate publicly traded stock, you can deduct fair market value up to 30 percent of AGI. Cryptocurrency is treated similarly to publicly traded stock for these purposes, allowing the same favorable treatment. If your donation exceeds the 30 percent limit, you can carry forward the excess deduction for up to five additional years.
One often overlooked consideration is the ongoing tax compliance burden. Revocable trusts require no separate tax filing during your lifetime. Irrevocable trusts must file Form 1041 annually, which adds complexity and cost. Private foundations face the most onerous requirements, including annual Form 990-PF filing, which becomes public information. The foundations investment activities, grants, compensation paid to officers, and all other financial details are disclosed publicly.
π° Want to Learn the Step-Up Basis Strategy?
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⚖️ Control and Flexibility: Who Really Runs the Show?
Control over your crypto assets is not just a matter of convenience but a critical factor in wealth preservation. The degree of control you retain varies dramatically between trusts and foundations, and choosing the wrong structure can leave you frustrated, locked out of decisions, or unable to respond to changing circumstances. Let us examine exactly how much control each structure provides.
With a revocable trust, you maintain essentially complete control. As both the grantor and typically the initial trustee, you can buy, sell, trade, stake, or otherwise manage your cryptocurrency exactly as you would in your personal name. You can change beneficiaries, modify distribution terms, or revoke the entire trust at any time. The trust is effectively an extension of yourself for control purposes, with the added benefits of probate avoidance and privacy upon death.
Irrevocable trusts require surrendering control, but the degree varies based on trust design. Traditional irrevocable trusts give all control to an independent trustee who must act in the beneficiaries best interests. However, modern trust structures have evolved to provide more grantor involvement. Directed trusts allow you to retain investment control while an administrative trustee handles compliance. Trust protectors can be appointed with power to modify trust terms under certain circumstances. These mechanisms preserve some flexibility while achieving estate tax benefits.
π Control Comparison: Trust vs Foundation
| Control Aspect | Revocable Trust | Irrevocable Trust | Private Foundation |
|---|---|---|---|
| Investment Decisions | Full control | Can retain via directed trust | Board control (you can be on board) |
| Change Beneficiaries | Yes, anytime | No (generally) | N/A (must be charitable) |
| Revoke/Dissolve | Yes | No | Only to another charity |
| Use Assets Personally | Yes | No | Absolutely Not |
| Family Employment | Yes (if trustee) | Limited | Yes (reasonable compensation) |
| Choose Grant Recipients | N/A | N/A | Yes (within IRS rules) |
Private foundations occupy a middle ground on control. You cannot use foundation assets for personal benefit under any circumstances due to strict self-dealing rules. However, you maintain significant control over how charitable dollars are deployed. As a foundation director, you decide which charities receive grants, how much they receive, and for what purposes. You can focus your philanthropy on causes you care about, respond to emerging needs, and even fund innovative charitable projects that established charities might not pursue.
The ability to employ family members is another control consideration. Private foundations can pay reasonable compensation to family members who provide legitimate services, creating a way to transfer wealth while reducing the foundation's assets for minimum distribution purposes. Trust arrangements can also employ family members in certain circumstances, but the rules are different and generally more restrictive for trusts that provide tax benefits.
Flexibility to respond to changing circumstances also differs. Revocable trusts can be modified freely. Irrevocable trusts may include provisions for modification through trust protectors or decanting to new trusts under state law, but these mechanisms have limitations. Private foundations can change their charitable focus relatively easily but cannot return assets to the founder or convert to a non-charitable purpose.
π How Do You Manage Multi-Generation Key Access?
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π Asset Protection: Shielding Your Crypto from Threats
Wealth protection extends beyond tax planning to shielding your assets from creditors, lawsuits, divorce proceedings, and other threats. Cryptocurrency presents unique vulnerabilities due to its digital nature, pseudonymous characteristics, and the evolving legal landscape surrounding it. The choice between trusts and foundations significantly impacts your level of protection against these threats.
Revocable trusts provide essentially no asset protection during your lifetime. Because you retain full control and the ability to revoke the trust, courts and creditors can reach trust assets as easily as personally held assets. The trust offers no shield against lawsuits, business creditors, or divorce claims while you are alive. Upon your death, assets may gain some protection within the trust structure depending on its terms and applicable state law.
Irrevocable trusts offer significantly stronger protection because you have given up control over the assets. Creditors generally cannot reach assets in a properly structured irrevocable trust because you no longer own them. However, there are important limitations. Transfers made to defraud existing creditors can be reversed under fraudulent transfer laws. Most states have a lookback period of two to four years during which transfers can be challenged. The trust must be established before any creditor problems arise to be effective.
π Asset Protection Comparison
| Threat Type | Revocable Trust | Irrevocable Trust | Private Foundation |
|---|---|---|---|
| Personal Creditors | No protection | Strong protection | Complete protection |
| Lawsuit Judgments | No protection | Strong protection | Complete protection |
| Divorce Claims | No protection | Varies by state | Complete protection |
| Business Liability | No protection | Strong protection | Complete protection |
| Estate Tax Claims | No protection | Strong protection | Complete protection |
| Fraudulent Transfer Risk | N/A | 2-4 year lookback | 2-4 year lookback |
Private foundations provide the strongest asset protection of all because the donated assets are no longer yours in any sense. They belong to the charitable entity and can only be used for charitable purposes. Personal creditors have no claim whatsoever against foundation assets. Even in bankruptcy, assets properly donated to a foundation before any financial distress began are generally unreachable. The trade-off, of course, is that you cannot use these assets for your personal benefit either.
Certain jurisdictions offer enhanced asset protection for trusts. Domestic Asset Protection Trusts, or DAPTs, available in states like South Dakota, Nevada, and Delaware, allow you to be a beneficiary of your own irrevocable trust while still gaining creditor protection. International jurisdictions like the Cook Islands, Nevis, and Liechtenstein offer even stronger protections but come with additional complexity, cost, and potential IRS scrutiny.
Divorce protection deserves special attention for crypto holders. In many states, assets held in a properly structured irrevocable trust before marriage may be protected from division in divorce. However, this varies significantly by jurisdiction and depends on factors like whether trust income was used for marital expenses. Private foundation assets are categorically protected from divorce claims since they were irrevocably donated to charity and are not marital property.
πΌ Worried About Crypto Divorce Issues?
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π― Decision Framework: Which Structure is Right for You?
After examining all the factors, how do you actually decide between a trust and a private foundation for your cryptocurrency wealth? The answer depends on your specific circumstances, goals, and priorities. Let me provide a practical framework for making this decision based on the factors that matter most to high-net-worth crypto investors.
Figure 5: A systematic decision framework helps crypto investors choose the right structure based on their specific goals and circumstances.
The first and most important question is whether you want your crypto wealth to ultimately benefit your family or charitable causes. If your primary goal is passing wealth to children and grandchildren, a trust is almost always the better choice. Private foundations require assets to be used exclusively for charity forever. You cannot use foundation assets to fund your grandchildrens education, help them buy homes, or provide family financial security. Trusts have no such limitation.
If you have genuine philanthropic goals and substantial wealth, a private foundation can accomplish both charitable giving and tax minimization simultaneously. Many ultra-high-net-worth families establish both structures: trusts to pass wealth to family and a foundation to manage their charitable giving. The foundation receives enough assets to meet philanthropic goals while trusts protect and transfer the remainder to heirs.
π Decision Framework: Trust vs Foundation
| If Your Priority Is... | Best Choice | Why |
|---|---|---|
| Passing wealth to family | Trust | Foundation assets cannot go to family |
| Immediate tax deduction | Foundation | Up to 30% AGI deduction on contribution |
| Avoiding capital gains now | Foundation | No capital gains tax on donated crypto |
| Maintaining control | Revocable Trust | Full control retained during lifetime |
| Estate tax elimination | Irrevocable Trust or Foundation | Both remove assets from taxable estate |
| Creditor protection | Irrevocable Trust or Foundation | Both provide strong protection |
| Step-up basis for heirs | Revocable Trust | Irrevocable trusts usually lose step-up |
| Privacy | Trust | Foundation Form 990-PF is public |
| Family philanthropic legacy | Foundation | Engages family in charitable mission |
| Simplicity and low cost | Revocable Trust | Lowest setup and ongoing costs |
Estate size is another critical factor. For estates under the federal exemption of $13.61 million, a revocable trust typically provides the best combination of benefits. You maintain full control, avoid probate, preserve the step-up basis, and keep things simple. For estates significantly exceeding the exemption, the calculus changes. Irrevocable trusts and foundations become more attractive because estate tax savings can exceed the value of step-up basis and other benefits that require inclusion in your estate.
The optimal strategy for many high-net-worth crypto investors is a combination approach. Use a revocable trust as your primary estate planning vehicle to pass most assets to family with step-up basis and probate avoidance. Transfer a portion of highly appreciated crypto to a private foundation when you want an immediate tax deduction and have genuine charitable intentions. Consider an irrevocable trust for assets exceeding the estate tax exemption where estate tax savings outweigh the loss of step-up basis.
Professional guidance is essential for implementing any of these structures. The interaction between trust law, tax law, and cryptocurrency creates complexity that requires specialized expertise. Work with an estate planning attorney experienced in digital assets, a tax advisor who understands crypto taxation, and potentially a financial advisor who can help model different scenarios. The cost of professional advice is trivial compared to the potential tax savings and wealth protection at stake.
π Ready to Start Your Estate Plan?
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❓ FAQ: 30 Critical Questions About Trusts and Foundations
Q1. Can I put cryptocurrency in a trust?
A1. Yes. Both revocable and irrevocable trusts can hold cryptocurrency. The trust must have provisions addressing digital asset management, private key custody, and trustee authority over crypto transactions.
Q2. Can I donate Bitcoin to a private foundation?
A2. Yes. Donating appreciated cryptocurrency to a private foundation allows you to deduct fair market value up to 30% of AGI while avoiding capital gains tax on the appreciation entirely.
Q3. Which provides better asset protection: trust or foundation?
A3. Private foundations provide the strongest protection because assets are irrevocably dedicated to charity. Irrevocable trusts also provide strong protection. Revocable trusts provide minimal protection during your lifetime.
Q4. Do I lose control of crypto in a trust?
A4. With a revocable trust, you retain full control. With an irrevocable trust, you surrender control, though directed trusts allow you to retain investment authority while achieving tax benefits.
Q5. How much does it cost to set up a crypto trust?
A5. A basic revocable trust costs $2,000 to $5,000. More complex irrevocable trusts with crypto-specific provisions range from $5,000 to $25,000. Dynasty trusts and international structures can exceed $50,000.
Q6. How much does it cost to establish a private foundation?
A6. Initial setup costs range from $5,000 to $15,000 including legal fees and IRS application. Ongoing annual costs for administration, accounting, and Form 990-PF filing typically run $5,000 to $20,000 or more.
Q7. What is the minimum amount needed for a private foundation?
A7. There is no legal minimum, but due to setup and ongoing costs, foundations typically make sense only with initial funding of at least $250,000 to $500,000. Some advisors recommend $1 million or more.
Q8. Can my family benefit from a private foundation?
A8. Family members can receive reasonable compensation for services provided to the foundation, such as serving as directors or officers. However, foundation assets cannot be used for personal benefit or distributed to family.
Q9. What is the 5% distribution requirement?
A9. Private foundations must distribute at least 5% of their net investment assets annually for charitable purposes. This includes grants to charities plus qualifying administrative expenses. Failure to meet this requirement results in excise taxes.
Q10. Do trusts avoid estate taxes?
A10. Revocable trusts do not avoid estate taxes as assets are included in your estate. Properly structured irrevocable trusts can exclude assets from your estate, avoiding estate taxes on those assets.
Q11. Do private foundations avoid estate taxes?
A11. Yes. Assets donated to a private foundation are completely removed from your taxable estate. Additionally, you receive an income tax deduction in the year of contribution.
Q12. What are self-dealing rules for foundations?
A12. Self-dealing rules prohibit most transactions between the foundation and disqualified persons including the founder, family members, and substantial contributors. Violations result in steep excise taxes and potential loss of tax-exempt status.
Q13. Can a trust hold NFTs?
A13. Yes. Trusts can hold any type of digital asset including NFTs. The trust document should specifically address NFTs and provide guidance on valuation, management, and distribution of these unique assets.
Q14. Can a foundation hold NFTs?
A14. Yes, but with considerations. NFTs must serve the foundations charitable purpose. Holding speculative NFTs could raise jeopardizing investment concerns. NFTs with artistic or educational value are more clearly appropriate.
Q15. Is foundation information public?
A15. Yes. Private foundations must file annual Form 990-PF which is publicly available. This discloses assets, investments, grants made, compensation paid, and other financial details. Trust information generally remains private.
Q16. Can I be the trustee of my own trust?
A16. For revocable trusts, yes, you typically serve as your own trustee. For irrevocable trusts designed to achieve estate tax benefits, an independent trustee is usually required, though directed trust structures allow you to retain investment control.
Q17. Can I run my own private foundation?
A17. Yes. You can serve as a director, officer, or both. You can receive reasonable compensation for your services. However, you must comply with all IRS rules including self-dealing prohibitions and minimum distribution requirements.
Q18. What is a dynasty trust?
A18. A dynasty trust is designed to hold assets for multiple generations, potentially perpetually in states without a rule against perpetuities. Assets can pass from generation to generation without estate taxes at each transfer.
Q19. What states are best for crypto trusts?
A19. South Dakota, Nevada, and Delaware are popular due to favorable trust laws, no state income tax on trust income, strong asset protection statutes, and perpetual trust options. Wyoming has also emerged as crypto-friendly.
Q20. Can I convert a trust to a foundation or vice versa?
A20. Converting a trust to a foundation is possible through a charitable donation from the trust. Converting a foundation to a trust is not possible because foundation assets must remain dedicated to charity permanently.
Q21. How is crypto valued for foundation donations?
A21. Cryptocurrency donated to a foundation is valued at fair market value on the date of donation. Use pricing from major exchanges and document the source. For large donations, a qualified appraisal may be advisable.
Q22. What is a donor-advised fund alternative?
A22. Donor-advised funds offer similar tax benefits to foundations with less complexity. You donate crypto, receive an immediate deduction, and advise the fund on grants over time. However, you have less control than with a private foundation.
Q23. Can trusts do charitable giving?
A23. Yes. Charitable remainder trusts and charitable lead trusts combine family wealth transfer with charitable giving. These split-interest trusts provide income to one beneficiary and remainder to another, with one being charitable.
Q24. What is the excise tax on foundation investment income?
A24. Private foundations pay a 1.39% excise tax on net investment income, including capital gains from selling crypto. This is much lower than individual capital gains rates but applies regardless of holding period.
Q25. Can I move crypto between trust and personal accounts?
A25. With revocable trusts, yes, freely. With irrevocable trusts, moving assets back to personal accounts would typically violate the trust terms and could trigger adverse tax consequences including gift or estate tax.
Q26. How do trusts handle crypto forks and airdrops?
A26. The trust document should address how new tokens from forks or airdrops are treated. Generally, they become trust property. The trustee must handle tax reporting for any income recognized from these events.
Q27. Can a foundation invest in DeFi protocols?
A27. Potentially, but with caution. Jeopardizing investment rules require foundations to invest prudently. High-risk DeFi investments could trigger excise taxes. The foundation should document its investment rationale and risk assessment.
Q28. What happens to a trust when I die?
A28. The successor trustee takes over management and distributes assets according to trust terms. For revocable trusts, this happens without probate. Assets pass directly to beneficiaries per your instructions.
Q29. What happens to a foundation when the founder dies?
A29. The foundation continues operating under its board of directors. Succession planning should address board composition after the founders death. The foundation can exist in perpetuity or be designed to spend down assets over time.
Q30. Should I have both a trust and a foundation?
A30. Many high-net-worth individuals benefit from having both. Use trusts to pass wealth to family with maximum tax efficiency. Use a foundation to manage charitable giving, engage family in philanthropy, and achieve additional tax benefits on portions of wealth you wish to dedicate to charitable purposes.
⚖️ Legal and Financial Disclaimer
This article is for educational and informational purposes only and does not constitute legal, tax, or financial advice. The choice between trusts and private foundations involves complex considerations that vary based on individual circumstances, state law, and tax situation. Consult with qualified legal, tax, and financial professionals before implementing any wealth protection strategy. Laws and regulations change frequently, and the information presented reflects understanding as of January 2026.
πΌ️ Image Usage Notice
Some images in this article are AI-generated or stock illustrations used for educational purposes. They may not represent actual legal structures, documents, or financial instruments. For accurate information, consult with licensed professionals.
π Article Summary
Trusts and private foundations serve fundamentally different purposes for crypto wealth protection. Trusts are ideal for passing wealth to family while maintaining control and achieving tax benefits like step-up basis. Private foundations offer powerful tax deductions and capital gains avoidance but require assets to be used exclusively for charity. For most crypto investors focused on family wealth transfer, trusts are the better choice. For those with genuine philanthropic goals and substantial wealth, a combination of both structures may provide optimal results. Professional guidance is essential for implementing either structure correctly.
Author: Davit Cho | Crypto Tax Specialist
Source: IRS publications, IRC Sections 4940-4945, Treasury regulations, and professional analysis
Contact: davitchh@gmail.com
Tags: crypto trust, private foundation, cryptocurrency estate planning, wealth protection, asset protection, tax benefits, irrevocable trust, revocable trust, charitable giving, digital asset legacy
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