Urgent Estate Planning considerations for Bitcoiners

Did you know federal estate taxes are as high as 40%? Yes, 40% of your wealth, poof, gone to the IRS when you pass. Did you also know many states have their own estate taxes? States like Hawaii and Washington reach rates as high as 20%. Could you imagine? A huge portion of your hard earned money clawed away by the IRS instead of benefiting your kids and grandkids. This is why you want to read this all the way through, no matter your current net worth or age.

Estate planning is critical for all families to ensure their assets avoid probate (avoid your bitcoin stack becoming public knowledge), are passed according to their wishes, assign guardianship for minor children, establish trustees or powers of attorney to act on your behalf if you were to become incapacitated, and protect your wealth from creditors. But with the extreme federal estate tax rates and time running out to take advantage of the important rule changes coming soon in 2026, I want to discuss why it’s important for you (as a bitcoiner) to pay attention to your estate plan right now and how an intentional, proactive plan could save you $1M-$10M+ in taxes when you pass. And yes, this applies to you right now even if you’re young (especially if you're young and own 10+ bitcoin).

What are the important rule changes?

So, admittedly (this will sound rude), I left an important clarifying point out regarding the federal estate tax rates, because I wanted to get your attention. That point - there’s an exemption. Now, in 2017 that exemption was $5,490,000. Meaning, the first $5,490,000 of anyone’s estate could pass, avoiding estate taxes entirely. But after the TCJA was signed into law, the estate exemption effectively doubled to $11,180,000 in 2018. Today, the exemption stands at $13,610,000 per person or effectively $27,220,000 per married couple. This is a lifetime exemption amount you can effectively plan around now or wait until you pass and let the chips fall where they may. One important point to drive home is any gift above the annual limits count towards you lifetime exemption. For example, if I gave you $1M tomorrow, my lifetime exemption would drop by $1M, because I effectively “used” part of it.

Don’t write this off if you are below those exemption limits… even if you’re significantly below those current limits. Why? That exemption is set to be cut in half, dropping down to $6M - $7M per person starting in 2026 (depending on inflation adjustments). Now, you still may be thinking this doesn’t apply to you, but if you own bitcoin, it does, because… it’s bitcoin and if bitcoin continues to do bitcoin things, then who knows what it will be worth (in fiat terms) by the time you pass. You could have over 30+ years of compounding growth still ahead of you, so even if your estate is small now, it could (and should) grow substantially over the coming decades.

Who should be reviewing their estate plan because of this?

If any one of these is true, that’s a sign you should at minimum do more research:

• Current net worth at or above $5M for individuals and $10M for couples.
• Own 20+ bitcoin
• Equity in a fast growing company
• Plan to pass assets down to younger generations
• Have more assets than you will need for financial freedom
• Reasonably expect your net worth to surpass exemption levels in your lifetime

Why should you care?

Well if your net worth is already around these exemption levels then it’s pretty clear why you should care about this, right? You likely became a bitcoiner because you don’t like or trust the government and similar institutions, so why would you be willing to hand them up to 40% of your wealth above the exemption level when you pass?

Let’s review a quick example:

John and Susan are 45 years old with a net worth of $10 million. $2 million of that is in Bitcoin. They have 3 kids that are in early adulthood or about to leave the nest. They are still working and earning a respectable household income.

Scenario 1: They do nothing with the information I’ll outline in this article. The estate tax exemption drops to $6.5 million in 2026 or $13 million for them as a married couple. Still below the post cut exemption levels, but they are only 45. Their assets have potentially 40 more years of growth ahead.

Now, they will spend down their assets in retirement, so let’s just say they are committed to not spending the bitcoin. They spend everything else, but want to pass the Bitcoin down. $2,000,000 worth of Bitcoin today growing at 15% annually would be $535,727,092 in 40 years when they turn 85. You may scoff at a 15% growth rate, but as of now Bitcoins lowest CAGR over any 4 year period is 25%. You as a Bitcoiner know that’s easily possible.

Alright, so they spent the remaining assets and held the bitcoin. If the 2026 assumed exemption level is $6,500,000 and that grows by 2% per year over the next 40 years, the exemption will be $28,704,515.

I’m sure you can see where I’m going with this. When they pass at 85, their estate (bitcoin) is valued at $535,727,092. They get to exclude $28,704,515, leaving $507,022,577 as taxable. If rates are the same then as they are today (40%) they would pay $202,809,030 in estate taxes. Could you imagine?

Scenario 2: They listen to their intelligent financial planner and move bitcoin out of their estate into an irrevocable trust structure that best suits their situation. They effectively use $2,000,000 of their exemption to do this. So their estate exemption drops from $6,500,000 down to $4,500,000.

That $2,000,000 in Bitcoin grows at 15% per year for 40 years to $535,727,092 and when they pass that full amount goes to their heirs tax free.

Again, they spent everything else, so the remaining estate is small and they owe zero dollars in estate taxes.

I hope that drives the point home very well. And I didn’t even use higher numbers! If your net worth is close to or above the current exemption levels of $13.61 million ($27.2 million per couple) and you own a significant amount of that in bitcoin, then you should consult a financial planner ASAP! You can effectively use that exemption while it's doubled and while your assets are at lower values compared to 10-40 years from now.

Planning Opportunities Before 2026

In scenario 2 mentioned earlier, I hinted at utilizing this exemption to move assets out of your estate prior to it being cut in half in 2026. But as the example hopefully demonstrated, this can be powerful even if your estate is well below those current exemption levels. So if your net worth is at or above the current exemption levels, then this rule change is absolutely urgent for you to consider. If not, then you may still have time, but Bitcoin can grow quickly, so it’s important to have an advisor that is proactively monitoring these strategies to utilize them when it makes sense for you.

There are multiple ways to get assets out of your estate to avoid the extreme tax. I’ll share a few high level things here and then I’ll dive deeper in late articles:

1. Gifting

If a gift is under $18,000 per recipient ($36,000 per couple per recipient) then you do not have to report that to the IRS and it does not count toward the lifetime estate exemption I highlighted earlier. It may not seem like a large amount, but if it’s done consistently and strategically, it could avoid a significant amount of taxes. And be a win-win, because you are passing the assets to your loved ones.

An interesting strategy I pondered recently was annual gifting to your parents. You could gift $72,000 worth of bitcoin to your parents every year and then receive that bitcoin back when they pass with a step up in cost basis to the value at the time of their passing. Obviously, there are many considerations to doing this that I won’t cover now, but it’s possible and if bitcoin continues to grow, that could save you a large chunk in taxes. With that being said, there are many common scenarios where gifting can make sense.

Fun fact: you can pull forward 5 years worth of this gift exclusion when funding a 529 plan for a beneficiary. Effectively raising your limit in that year, but you cannot gift any more to that beneficiary over the 5 year period.

2. Irrevocable Trust Structures

Irrevocable trusts are a key tool for high net worth families to avoid estate taxes on their assets when they pass. By definition, irrevocable trusts cannot be changed once they are established and funded. Assets that you put into an irrevocable trust are effectively no longer owned by you, therefore they are no longer included in your estate. When those assets leave your estate, they decrease the available amount of your lifetime estate tax exemption by the total value of the assets. For example, if you move $13 million worth of bitcoin into an irrevocable trust, your remaining available exemption drops to $610,000 based on this year’s exemption limit numbers.

Now, even though they are not owned by you any longer, you still dictate what happens with the assets by the type of trust you create and the guidelines you include in the trust documents. And the beneficiaries of the trust can still be your heirs or anyone else you choose.

You then appoint a trustee who is in charge of managing the trust and executing on the rules laid out in the trust documents.

There are many, seemingly endless types of irrevocable trusts that you can establish. I will not go into them in this article, but I will cover them in the future. It’s important to work with your financial planner and estate attorney to decide what’s right for you and your family.

3. Donate to your Church or Charity

If you’re feeling generous, you can always donate to your church or various charities to get assets out of your estate and put them to good use making this world a better place. In fact, there are irrevocable trust structures that allow you to give generously and also pass down assets to future generations effectively blending multiple strategies into one.

4. Spend the money

I had to say it. If you would rather spend the money now to enjoy your life and create meaningful experiences with your loved ones then do it. Determining how much you can spend without running out of money in retirement is foundational to what we do as financial planners. So even though accumulating wealth and avoiding taxes is a fun game if you will, remember what’s important. It’s okay to spend the money you’ve worked hard to earn on meaningful things that benefit you and your loved ones today rather than 20-30 years from now.

*Don’t forget, it’s not all or nothing decisions you must make. You can blend any combination of strategies that work well for you, your family, and your goals. That is the benefit of working with financial planners that are bitcoiners, because they can help put all the various pieces together into a complete financial plan.*

We Can’t Predict the Future

To be fair, it’s important to note that although the estate exemption is set to drop 50% beginning in 2026, that could change. Trump or Kamala along with their administration could decide to extend the elevated exemption into the future. On the flipside, they could cut it even further. In my opinion, over the long term, this exemption could be a target for cuts to raise tax revenues. That’s total speculation of course. All this to say, we don’t know what the future holds and all we can do is make the best decisions possible with the present facts. We’ll see how things change.

Act Now to Preserve Your Bitcoin Wealth

For Bitcoiners, the scheduled sunset of the estate tax exemption presents both a challenge and an opportunity. By acting now, you can lock in the current higher exemption limits and protect your growing Bitcoin wealth from future estate taxes. Estate planning is not just about reducing taxes—it’s about ensuring that your hard-earned wealth is passed on securely to the next generation.

Don’t wait until it’s too late. Start exploring your estate planning options today to take full advantage of the current exemption limits before they expire. Schedule a call with us to discuss how we can help you craft a plan that ensures your Bitcoin—and your entire estate—are preserved for future generations.
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