Entity Setup
Entity Safe Harbor for Trusts Holding Digital Assets: What It Means for Your Trust Setup
New IRS guidance offers a safe harbor for investment trusts that also are grantor trusts to stake digital assets while preserving tax status—swiftly amend your trust instrument to qualify.
By NomadicTax Research Team • 5-8 min read • November 22, 2025
## Understanding the New Safe Harbor in Rev. Proc. 2025-31
In **Revenue Procedure 2025-31**, the IRS laid out a safe harbor that allows certain trusts to engage in **staking digital assets** and still maintain their status as **investment trusts** and **grantor trusts** for Federal income tax purposes. ([irs.gov](https://www.irs.gov/irb/2025-48_IRB?utm_source=openai))
### Key Elements:
- Applies only to **existing trusts** or new ones that qualify under the definitions in the procedure. ■ Trust must otherwise already meet investment trust criteria under §301.7701-4(c), and be a grantor trust. ([irs.gov](https://www.irs.gov/irb/2025-48_IRB?utm_source=openai))
- Offers a **limited time period** to **amend governing instruments** to adopt requirements of the safe harbor if the trust doesn’t yet comply. ([irs.gov](https://www.irs.gov/irb/2025-48_IRB?utm_source=openai))
## Why This Matters for Digital Asset Staking
Without clear guidance, staking digital assets (the process of participating in proof-of-stake blockchains)—even if passive—can risk classifying the trust as not meeting investment trust requirements or losing grantor trust status. That could trigger unintended taxation or affect beneficiaries. This safe harbor aims to remove that uncertainty. ([irs.gov](https://www.irs.gov/irb/2025-48_IRB?utm_source=openai))
## Steps to Elect Safe Harbor Status
1. **Review trust’s governing instrument** and trust operations to ensure they align with investment trust definition and grantor trust requirements. If they don’t, plan amendments.
2. If staking digital assets, document clearly how the trust handles the assets, income treatment, and control (consistent with grantor trust rules).
3. Amend the trust agreement before any staking begins—or soon after—to reflect language prescribed in the safe harbor if needed. ([irs.gov](https://www.irs.gov/irb/2025-48_IRB?utm_source=openai))
4. Maintain records of all digital-asset staking events, rewards, expenses, and distribution flows for tax reporting.
## Example: Trust Prepared for Safe Harbor
Suppose a family trust invests in real estate and equities, meets criteria as investment trust, and is a grantor trust. The trustees decide to stake some crypto assets. To qualify under the safe harbor, they amend their trust instrument to include language required by the IRS safe harbor, track all staking income separately, ensure control remains consistent with grantor trust terms—thus avoiding losing their tax status.
## Implications and Best Practices
- Preserves favorable tax treatment of trusts: no unintended change in trust classification.
- Beneficiaries avoid shifting burden of taxes or unexpected taxable income.
- Trusts should get legal review when amending governing documents.
- Keep an eye on potential future IRS guidance or further regulations related to digital assets.
This safe harbor provides clarity in a fast-evolving area. Trusts that stake digital assets now have a roadmap to do so without risking basic trust classification—and limited time to align documents accordingly.