Step-Up in Basis for Crypto in a Trust: Essential 2026 Guide

Step-up is the focus of this guide. Whether crypto in a trust gets a basis reset when its owner dies depends on the kind of trust. The title says one word could cost millions, and I read that as the difference between a trust the owner can revoke or change and one the owner has put beyond their reach.

I use the statute text, the IRS’s own ruling and the estate-tax regulation, and I label the rest as my reasoning. The example numbers are assumed. The encouraging point is that this is a drafting and planning question, so it can be reviewed with an attorney well before it matters.

Step-up: The Basic Rule

Under section 1014(a)(1), property acquired from a decedent generally takes a basis equal to its fair market value at the date of death. Under section 1014(b)(9), that applies to property acquired by reason of death that is included in the decedent’s gross estate. If the estate elects the alternate valuation date under section 2032, the basis is the value at that date (26 U.S.C. § 1014).

Revocable Trusts and Retained Powers

The same statute treats property transferred in trust as acquired from the decedent where the decedent reserved the right at all times before death to revoke the trust (section 1014(b)(2)) or to make any change in the enjoyment of the property, including through a power to alter, amend or terminate the trust (section 1014(b)(3)) (26 U.S.C. § 1014).

On the estate-tax side, 26 CFR § 20.2038-1 says the gross estate includes property the decedent transferred if, at death, the decedent held a power to alter, amend, revoke or terminate who enjoys it. The regulation describes exceptions, such as transfers made for full consideration or powers that could be exercised only with the consent of everyone with an interest (26 CFR § 20.2038-1).

Whether your specific trust fits any of these is a question for the document and your attorney.

What the IRS Ruled on Irrevocable Grantor Trusts

In Revenue Ruling 2023-2, the IRS considered a grantor who created an irrevocable trust, funded it with an asset in a completed gift, kept a power that made the grantor the income tax owner, and held no power that would cause the trust’s assets to be included in the gross estate. The IRS held that the asset’s basis was not adjusted to fair market value at the grantor’s death under section 1014, because the asset did not pass from the decedent within the meaning of section 1014(b) (Internal Revenue Bulletin 2023-16). The beneficiaries then keep the original basis.

A Worked Example (Assumed Numbers)

These figures are assumed. Say crypto was bought for $300,000 and is worth $1,200,000 at death. With a step-up, the basis becomes $1,200,000, so a sale at that price produces no gain. Without one, the basis stays $300,000 and a sale produces a $900,000 gain. At an assumed combined federal rate of 23.8% (20% plus the 3.8% net investment income tax, which depends on the person’s situation), that gain would carry about $214,200 of tax.

	With step-up	Without
Basis	$1,200,000	$300,000
Gain if sold at $1,200,000	$0	$900,000
Tax at assumed 23.8%	$0	$214,200

Community Property

For community property, section 1014(b)(6) says a surviving spouse’s one-half share takes the stepped-up basis if at least one-half of the whole community interest was included in the decedent’s gross estate (26 U.S.C. § 1014). IRS Publication 551 gives an example: in a community property state, a $100,000 fair market value community interest gives each half a $50,000 basis when a spouse dies (IRS Publication 551).

What I Can’t Confirm, and My Reasoning

My reasoning, not a ruling: since the rule turns on gross-estate inclusion, an asset a person can take back at will seems more likely to be included than one placed beyond their reach, which matches the revocation language quoted above. How that plays out for a specific trust is a drafting question for an attorney.

How to Get Started With Crypto in a Trust

Find out exactly what type of trust holds your crypto by reading the document or asking its drafting attorney. That is my suggestion.
Ask an estate attorney whether the assets will be in your gross estate, since that is the test in the statute.
If you have an older irrevocable trust, ask an attorney to review it in light of Revenue Ruling 2023-2. That is my suggestion.
Keep cost-basis records for every holding, since the figures above depend on them.

Crypto in a Trust: Questions Answered

Does an irrevocable trust get a step-up? Not if its assets aren’t in the grantor’s gross estate, according to the ruling above.

Does a revocable trust get a step-up? The statute treats property in a trust the decedent could revoke as acquired from the decedent, as quoted above.

Does a community property share get a step-up? Section 1014(b)(6) describes the condition for a surviving spouse’s half, as quoted above.

My Take on Crypto in a Trust

In my view, the most valuable step is a short conversation with the attorney who drafted the trust, asking one question: will this crypto be in my gross estate?
In my suggestion, put cost-basis records in the same folder as the trust documents so they are found together.

Sources

This article offers general information and my own opinions, not financial, tax, or legal advice. The figures in worked examples are assumed. Laws, tax rules, and products change and can differ by location, so check current official sources and talk to a qualified professional about your own situation.

Crypto in a Trust: Revocable vs. Irrevocable and the Basis Step-Up at Death