Inheriting Cryptocurrency: Taxes, Access, and What to Do

Bitcoin hit six figures. Ethereum became institutional. Millions of Americans accumulated significant crypto wealth over the past decade — and now, increasingly, their heirs are inheriting it. If you recently inherited cryptocurrency, two facts matter most: (1) you almost certainly received a step-up in basis that eliminates all prior gains, and (2) getting access to the crypto can be the harder problem. Here's what you need to know before making any decisions.

The good news: step-up basis applies to crypto

Under IRC § 1014, inherited property receives a new cost basis equal to the fair market value on the date of death.¹ Cryptocurrency is property under IRS Notice 2014-21 — so the same step-up rules apply.

What this means in practice: if your parent bought $20,000 of Bitcoin that grew to $180,000 before they died, your inherited cost basis is $180,000 — not $20,000. The $160,000 of embedded gain disappears entirely for income tax purposes. If you sell at $180,000, you owe nothing in capital gains tax. If you sell at $200,000, you owe tax only on the $20,000 gain above your stepped-up basis.

Immediate long-term capital gains treatment

A second tax benefit applies that surprises most heirs. Under IRC § 1223(11), inherited assets automatically qualify for long-term capital gains rates regardless of how long you personally hold them.² Normally you'd need to hold an asset for more than one year to qualify for LTCG rates instead of higher short-term (ordinary income) rates. That holding period requirement doesn't apply to inherited property.

This means you can sell inherited cryptocurrency the day after you receive it and still pay the long-term rate — 0%, 15%, or 20% depending on your income, plus the 3.8% Net Investment Income Tax if applicable. You are not forced to hold for a year to avoid short-term treatment.

2026 capital gains tax rates on inherited crypto

Long-term capital gains rates for 2026 (from IRS Rev. Proc. 2025-32):³

The 3.8% Net Investment Income Tax (NIIT) applies on top of LTCG rates if your modified AGI exceeds $200,000 (single) or $250,000 (MFJ).³ These thresholds are set by statute and are not inflation-adjusted. At the top of the rate stack, a high-income heir selling crypto pays 20% + 3.8% = 23.8% federal. Compare that to ordinary income rates of up to 37% — the step-up combined with LTCG treatment is a substantial tax advantage.

How to value crypto at the date of death

Your step-up basis is the fair market value on the date of death (or the alternate valuation date under IRC § 2032, used only for large taxable estates). For publicly traded cryptocurrency, FMV is the spot price at the time of death — or conventionally, the high-low average for the date.⁴

Practical steps for establishing date-of-death valuation:

• Major exchanges (Coinbase, Kraken, Gemini): export historical price data for the specific date. Most exchanges have a market data or price history page.
• CoinMarketCap or CoinGecko: reliable sources for historical daily open/high/low/close prices for hundreds of tokens.
• For large estates: use the same price source consistently across all tokens and document it. A CPA or estate attorney can advise on the documentation standard.
• For unusual tokens (low-liquidity altcoins, DeFi tokens): professional valuation may be needed. If a token had effectively no market, the FMV may be near zero, which limits step-up value but also limits estate inclusion.

Keep a permanent record of your valuation documentation. When you eventually sell, you'll need to prove your cost basis to your exchange or tax preparer.

Getting access to inherited crypto

This is often the harder problem. Unlike a brokerage account, cryptocurrency has no central authority that can restore access. How you get the crypto depends on where it's held.

Crypto held on exchanges (Coinbase, Kraken, Gemini, etc.)

Exchanges treat crypto accounts as financial accounts. To claim the inherited crypto:

1. Contact the exchange's estate/bereavement team (most have a dedicated process).
2. Provide a certified copy of the death certificate and documentation of your right to inherit (probate court letters testamentary, or a small-estate affidavit in some states).
3. The exchange will either transfer the assets to a new account in your name or liquidate and send proceeds.

Major exchanges typically take 2–8 weeks to process estate claims. If the estate is going through formal probate, the executor must handle this — individual heirs can't claim directly until the estate distributes assets to them.

Hardware wallets and seed phrases

Crypto held in hardware wallets (Ledger, Trezor, etc.) or software wallets is controlled entirely by the private key or 12/24-word seed phrase. Whoever has the seed phrase controls the crypto — the estate is irrelevant to the blockchain.

What to look for:

• A physical card or paper with the seed phrase (often kept with estate documents, in a safe, or in a safety deposit box)
• A password manager or encrypted file containing wallet credentials
• Notes or a letter left by the deceased with access instructions
• The hardware wallet device itself — if you have it and the PIN, you may not need the seed phrase

Cryptocurrency estate planning for the living

If you haven't yet received the inheritance but are helping plan an estate, or if you want your own heirs to access your crypto: store the seed phrase in a fireproof safe or safety deposit box, include wallet access instructions in a "digital asset memorandum" attached (but not included in) the will, and consider a trusted hardware wallet or exchange that supports estate beneficiary designations.

NFTs: the collectibles complication

Non-fungible tokens may face a higher tax rate than regular cryptocurrency. Under IRS Notice 2023-27, the IRS applies a "look-through analysis" to determine whether an NFT constitutes a collectible under existing tax law.⁵ If the underlying asset the NFT represents is a collectible (art, trading cards, sports memorabilia, rare coins), the NFT itself is treated as a collectible.

Collectibles face a maximum long-term capital gains rate of 28% under IRC § 1(h)(4) — higher than the 15–20% rate that applies to stocks and cryptocurrency. This 28% cap applies to long-term gains only; short-term gains are still taxed as ordinary income (up to 37%).⁶

Step-up basis still applies to inherited NFTs, resetting to date-of-death value. The issue is which rate applies when you sell above that value. If the NFT clearly represents digital art or sports memorabilia, the 28% rate likely applies. Utility tokens, governance tokens, and pure financial NFTs are less clear — final IRS guidance remains pending.

For high-value NFTs (above $25,000), get a tax professional opinion on classification before selling. The rate difference matters.

Post-death events: hard forks, airdrops, and staking

The step-up applies to crypto owned at the date of death. Events that happen after death are treated differently:

• Hard forks that create new coins in a wallet the estate controls: the new coins may be ordinary income to the estate when received, at the FMV on the receipt date. (The underlying tax treatment of forks is still evolving, but the IRS has indicated in FAQ guidance that receipt of new tokens from a fork is income.)⁷
• Airdrops received after death: ordinary income to the estate or beneficiary when the right to the tokens becomes fixed, at FMV on receipt.
• Staking rewards that accumulate in the decedent's wallet after death: ordinary income when received (the Supreme Court's 2024 Jarrett holding notwithstanding, the IRS still treats most staking rewards as taxable income on receipt). These are NOT subject to step-up — they accrue after death.

For estates with active DeFi positions (liquidity pools, staking contracts, lending protocols), these ongoing income streams need to be managed and reported. The executor typically needs to take action to claim and close out positions before distribution to beneficiaries.

New IRS broker reporting rules (2025 onward)

Starting with the 2025 tax year (reported in early 2026), crypto exchanges and brokers are required to report customer transactions to the IRS via Form 1099-DA under final regulations issued in July 2024.⁸ This includes reporting your cost basis on sales. If you received crypto via inheritance and subsequently sell it, your exchange may ask you to provide your inherited cost basis — because the step-up is not automatically in their system. Keeping clear documentation of your date-of-death valuation becomes more important now, not less.

Estate tax: the $15 million federal exemption

If the total estate (including crypto) is below the federal estate tax exemption, no estate tax is due. For 2026 and beyond, the exemption is $15 million per person — permanently raised by the One Big Beautiful Bill Act (OBBBA, July 2025).⁹ For most families, including those with significant crypto holdings, the estate itself won't owe federal estate tax. The step-up basis benefit flows to the beneficiaries regardless.

For very large estates (above $15M individually, $30M for married couples with portability), estate tax exposure and step-up planning intersect. An estate planning attorney should be involved at those levels.

First 60 days: what to do

1. Locate all crypto. Check email for exchange accounts, look for hardware wallets and seed phrases, review the decedent's password manager if accessible. Don't assume there's nothing — people accumulate crypto across many platforms.
2. Document date-of-death values. Pull and save historical price data for every token across every wallet or exchange account. This is your cost basis — preserve it.
3. Don't sell yet — at least not until you understand your basis. The step-up may eliminate most of the taxable gain, making a hasty sale unnecessary.
4. File estate claims with exchanges. The process is slow; start early. You'll need a death certificate and estate documentation.
5. Inventory DeFi and staking positions. If any positions are active, the executor may need to act to prevent ongoing income accumulation or position changes.
6. Consult a CPA or fee-only advisor. The step-up benefit alone may save you more in taxes than the advisor costs.

Related guides and tools

• Step-Up Basis: What It Is and How to Use It — the § 1014 rules in full; which assets qualify and which don't
• Step-Up Basis Tax Savings Calculator — calculate how much you save compared to selling at the decedent's original cost basis
• Inheriting a Brokerage Account — step-up for stocks, ETFs, and mutual funds; LTCG strategy after inheritance
• What to Do When You Inherit Money: A Complete Guide — full first-year playbook across all asset types
• Inheritance Tax by State 2026 — five states impose inheritance tax; crypto is included if the estate is subject