Borrow Against Bitcoin Instead of Selling: The Wealth Preservation Strategy Every Family Needs to Know

The Sell vs. Borrow Decision

Every time a Bitcoin-wealthy family needs liquidity — to fund a lifestyle expense, pay a tax bill, make an investment, or contribute to a trust — they face a choice most advisors never frame correctly: sell the Bitcoin, or borrow against it.

The conventional default is to sell. It feels simple. You hold Bitcoin, you need dollars, you sell some Bitcoin and receive dollars. The problem is that selling is not free. For any family holding Bitcoin acquired years ago, the embedded capital gain is enormous — and liquidating it carries a tax cost that most families dramatically underestimate.

The $1 Million Sale — The True Cost

Consider a straightforward scenario. A family holds Bitcoin with a cost basis of $50,000 (bought years ago). Today it is worth $1,000,000. They need $500,000 in cash for a real estate investment. The intuitive move: sell $1M of Bitcoin, pay the tax, invest the remainder.

Here is what that actually costs:

• Bitcoin sold: $1,000,000 (fair market value)
• Cost basis: $50,000 (5% basis, 95% embedded gain)
• Long-term capital gain: $950,000
• Federal tax at 23.8% (20% LTCG + 3.8% NIIT): $226,100
• State tax (California 13.3%): $126,350
• Total tax liability: ~$352,450
• After-tax proceeds: ~$647,550

To receive $500,000 in usable cash, this family paid $352,450 in combined federal and state taxes — and permanently eliminated their Bitcoin position on those units. The Bitcoin is gone. The compounding is gone. The stepped-up basis opportunity is gone.

The Borrow Alternative

Now consider the same scenario using a Bitcoin collateral loan:

• Bitcoin pledged as collateral: $1,000,000
• Loan at 50% LTV: $500,000 in USD
• Tax on loan proceeds: $0
• Bitcoin position: Intact — still held, still compounding
• Annual interest cost (at 10%): $50,000/year
• Basis preservation: Yes — if held until death, stepped-up basis eliminates the embedded gain

The family receives exactly $500,000 in cash, pays zero tax on receipt, and keeps the full Bitcoin position in place. They pay interest — $50,000 per year at a 10% rate — but that interest may be deductible as investment interest expense. And if Bitcoin continues to appreciate, the compounding on the retained position substantially outpaces the interest cost in most scenarios.

The $352,450 tax bill in the sell scenario is not recoverable. It represents a permanent reduction in generational wealth. Over 20 years of Bitcoin compounding at 15% annually, $352,450 would have grown to approximately $5.8 million. That is the true cost of selling — not just the tax paid today, but the compounding foregone forever on the capital surrendered to taxes.

How Bitcoin Collateral Loans Work

A Bitcoin collateral loan is a secured loan in which Bitcoin is pledged as collateral for a cash advance. The structure is straightforward: you transfer your Bitcoin to a custody arrangement controlled by (or accessible to) the lender, receive USD loan proceeds, and retain both the economic exposure to Bitcoin's appreciation and the responsibility to repay the loan plus interest.

Loan-to-Value (LTV) Ratios

The loan-to-value ratio determines how much you can borrow relative to the market value of your Bitcoin collateral. Most Bitcoin collateral lenders offer initial LTV ratios between 40% and 70%:

• 40% LTV: $1M Bitcoin → $400,000 loan. Conservative. Provides a 60% price-drop buffer before margin call.
• 50% LTV: $1M Bitcoin → $500,000 loan. The most common starting point for institutional borrowers.
• 60% LTV: $1M Bitcoin → $600,000 loan. Higher leverage, smaller buffer. Bitcoin would need to drop only 33% before a margin call triggers.
• 70% LTV: $1M Bitcoin → $700,000 loan. Aggressive. Bitcoin must drop only 30% from origination for a margin call at this LTV.

Most sophisticated Bitcoin families who use collateral loans for estate planning purposes deliberately borrow at 30–40% LTV — well below the maximum — specifically to create margin call buffer and reduce the risk of forced liquidation during a Bitcoin price correction.

Interest Rates in 2026

As of early 2026, Bitcoin-backed loan interest rates from major institutional lenders range approximately 8–12% annually. This range reflects:

• Bitcoin's volatility premium over traditional secured lending
• The cost of institutional custody and compliance infrastructure
• The lender's capital cost and return requirements
• Whether the loan is recourse or non-recourse (non-recourse loans typically carry a 1–3% premium)

For context: a $1,000,000 loan at 10% annual interest costs $100,000 per year, or $8,333 per month. Against a Bitcoin position that has historically appreciated far more than 10% annually in favorable market conditions, this interest cost is frequently less than the opportunity cost of selling. That said, Bitcoin has also experienced extended bear markets — and interest compounds whether Bitcoin is going up or down.

Loan Term Structures

Bitcoin collateral loans are available in several term structures:

• Open-term / revolving: No fixed maturity; loan remains outstanding as long as LTV is maintained and interest is paid. Provides maximum flexibility but typically carries a slightly higher rate.
• Fixed 12-month: The most common structure for institutional borrowers. Term expires at 12 months; borrower can repay, refinance, or in some cases roll over.
• Fixed 24–36 month: Longer fixed terms available from select lenders for qualified borrowers. Provides more certainty on terms but reduces flexibility.

For estate planning purposes, open-term or revolving structures are generally preferable — they allow families to manage the loan's size and duration in response to Bitcoin price movements and liquidity needs without being forced to refinance at potentially unfavorable market conditions.

Recourse vs. Non-Recourse Loans

This distinction is consequential for Bitcoin families:

Recourse loans: If Bitcoin is liquidated in a margin call and the proceeds do not fully repay the loan, the borrower remains personally liable for the deficiency. Most Bitcoin collateral loans are recourse.

Non-recourse loans: The lender's sole remedy upon default is taking the collateral. If Bitcoin drops severely and the collateral is worth less than the outstanding loan, the lender absorbs the loss — the borrower has no personal liability beyond the pledged Bitcoin. Non-recourse loans provide significant downside protection and are particularly valuable in estate planning structures where the trust (not the individual) is the borrower. Non-recourse Bitcoin loans are available from select lenders but carry higher rates.

Margin Call Mechanics

Every Bitcoin collateral loan has a margin call LTV threshold — typically around 70–80% of collateral value. When the outstanding loan balance reaches this percentage of the current Bitcoin market value (because Bitcoin's price has dropped), the lender issues a margin call. The borrower must then:

1. Post additional Bitcoin collateral to bring the LTV back down to an acceptable level, or
2. Repay a portion of the loan to reduce the outstanding balance relative to collateral value, or
3. Allow the lender to liquidate collateral to bring the LTV back into compliance.

Option 3 — collateral liquidation — triggers a capital gains event on the Bitcoin sold. This is why margin call risk management is a first-order concern for any family using Bitcoin collateral loans as part of an estate plan. We address this in detail in the margin call risk section below.

The Major Lenders

The Bitcoin collateral lending market contracted significantly after the 2022–2023 collapse of Celsius and BlockFi. What remains is a smaller, more disciplined set of institutional lenders — which is actually good for borrowers who care about counterparty risk and custody integrity.

Unchained Capital

Unchained Capital is the most institutionally trusted Bitcoin-native lender in the US market as of 2026. Their distinctive feature is their collaborative multi-sig custody model: Bitcoin collateral is held in a 2-of-3 multi-signature arrangement where Unchained holds one key, the borrower holds one key, and a third-party key agent (such as Citadel Dispatch or a trusted custodian) holds the third. No single party — including Unchained — can move the Bitcoin unilaterally. This structure means Unchained cannot rehypothecate your collateral, cannot lend it to third parties, and cannot unilaterally seize it. If Unchained goes bankrupt, the Bitcoin is still accessible via the multi-sig arrangement.

Unchained's loans are US-based, denominated in USD, and available to qualified individual and trust borrowers. Initial LTV typically starts at 40–50%. Unchained is particularly well-suited for estate planning applications where custodial integrity and lender solvency risk are paramount concerns.

Ledn

Ledn is a BTC-only institutional lender with a strong reputation for custody transparency and institutional-grade operations. Ledn operates with segregated custody through Coinbase Prime (for B2X product collateral) and has made public commitments to "Proof of Reserves" and attestation-based transparency. Ledn's borrower base is international, and their products are available to US accredited investors in most states. Their institutional Bitcoin-backed loan product serves HNW borrowers with large positions. Interest rates and LTV ratios are competitive with the institutional market.

Galaxy Digital

Galaxy Digital's lending arm offers Bitcoin-secured credit facilities to institutional borrowers and sophisticated family offices. Galaxy operates at a larger scale, serving family offices, corporate treasuries, and institutional investors with bespoke structured credit facilities. Minimum loan sizes at the institutional level are typically $5M+, making Galaxy's lending products most relevant for larger Bitcoin wealth holders.

Post-2022 Alternatives: What Happened to BlockFi and Celsius

BlockFi and Celsius were once the largest retail Bitcoin lending platforms. Both collapsed in 2022–2023 due to a combination of rehypothecation (lending out customer Bitcoin to generate additional yield), concentrated exposure to the Three Arrows Capital and FTX implosions, and inadequate capital buffers. BlockFi filed Chapter 11 in November 2022; Celsius filed Chapter 11 in July 2022. Customers with Bitcoin pledged as collateral at both platforms — and in many cases, Bitcoin held in "earn" accounts — faced months of withdrawal freezes, haircuts, and uncertain recovery.

The lesson is permanent and applies to every Bitcoin lender evaluation: custody model and rehypothecation policy matter as much as interest rate. A lender offering 8% who does not rehypothecate your collateral is safer than a lender offering 6% who uses your Bitcoin as a funding source for other operations.

What to Look for in a Bitcoin Lender

• Custody model: Who holds the keys? Is it multi-sig? Can the lender unilaterally move your Bitcoin?
• Rehypothecation policy: Does the lender pledge or lend out your Bitcoin to third parties? Explicitly ask and verify in the loan agreement.
• Margin call notice period: How much advance notice do you receive before collateral is liquidated? 24 hours is inadequate; 72–96 hours is better; some lenders provide real-time monitoring dashboards.
• Margin call LTV threshold: At what LTV does the margin call trigger? And at what LTV does forced liquidation begin?
• Regulatory standing: Is the lender licensed in your state? Is it subject to banking or money transmission regulation that provides counterparty protection?
• Bankruptcy remoteness: If the lender goes bankrupt, what happens to your collateral? Is it clearly your property or a creditor claim?

Tax Treatment of Bitcoin Collateral Loans

The tax treatment of Bitcoin-secured loans is one of the clearest and most favorable aspects of this strategy — and the most important to understand precisely, because the line between tax-free borrowing and taxable disposal is unambiguous but occasionally misunderstood.

Borrowing Is Not a Taxable Event

When you borrow money, you receive loan proceeds — not income. This principle applies across all asset types and is not controversial. Under general US federal tax principles, and specifically under IRS Notice 2014-21 (which established that Bitcoin is property for US federal tax purposes), taking out a loan secured by Bitcoin is not a disposition of the Bitcoin. No capital gain is recognized. The loan proceeds are not gross income. The basis in the Bitcoin collateral does not change.

This is the foundation of the entire strategy. You access USD liquidity without recognizing the embedded gain on your Bitcoin position.

Interest Deductibility — Investment Interest Expense Under §163(d)

Interest paid on a Bitcoin collateral loan used for investment purposes — including investing loan proceeds in other assets, funding a trust, or other investment activities — may qualify as investment interest expense under IRC §163(d). Investment interest expense is deductible to the extent of net investment income in the same tax year. If your investment interest expense exceeds your net investment income, the excess is carried forward to future years.

Key requirements for §163(d) deductibility:

• The loan must be incurred to generate investment income (not personal expenses or passive activities)
• The deduction is limited to net investment income (capital gains, dividends, interest) in the year of deduction
• Excess investment interest expense carries forward indefinitely
• Interest on loans used for personal expenses (home improvements, lifestyle purchases) does not qualify as investment interest expense

For Bitcoin families who use loan proceeds to fund investments that generate investment income, the interest cost may be substantially offset by the §163(d) deduction — reducing the effective after-tax cost of the borrowing.

What Actually Triggers a Taxable Event

The critical line: a taxable event occurs when Bitcoin is disposed of — not when it is pledged as collateral. The following events do not trigger a taxable event:

• Pledging Bitcoin to a lender as collateral
• Receiving loan proceeds in USD
• Paying interest on the loan
• Renewing or extending the loan term
• Transferring Bitcoin between wallets as part of collateral management

The following events do trigger a taxable event:

• Margin call liquidation: When the lender sells your Bitcoin to cover an LTV breach, that constitutes a forced sale and recognized capital gain. The gain equals the sale proceeds minus your basis in the liquidated Bitcoin. This is why margin call prevention is an estate planning priority, not just a financial management concern.
• Voluntary repayment by selling Bitcoin: If you sell Bitcoin to repay the loan, that sale triggers capital gains recognition on the sold units — but only on the units actually sold, and you retain any unsold Bitcoin.
• Loan forgiveness or cancellation: If the lender cancels the remaining loan balance (e.g., in a restructuring), the forgiven amount may constitute cancellation of indebtedness income under IRC §61(a)(11) — generally taxable unless an exclusion applies.

The Wash Sale Non-Application to Bitcoin

As of 2026, the wash sale rule (IRC §1091) — which disallows a loss deduction if you repurchase substantially identical securities within 30 days — does not apply to Bitcoin. Bitcoin is property, not a security. This creates an interesting opportunity: if you sell Bitcoin at a loss to repay a collateral loan (for example, in a declining market), you can immediately repurchase the same amount of Bitcoin to restore your position, harvesting the loss without the 30-day waiting period required for stocks. This interaction between the collateral loan structure and loss harvesting opportunities is worth discussing with your tax advisor. Note that proposed legislation has repeatedly sought to extend wash sale rules to crypto — confirm current law before executing.

Estate Planning Integration

The most powerful application of Bitcoin collateral loans is not simply accessing liquidity — it is the integration of borrowing with long-term estate planning structures to defer capital gains indefinitely while transferring wealth to the next generation.

Keeping Low-Basis Bitcoin Alive for Stepped-Up Basis

Under IRC §1014, assets included in a decedent's gross estate receive a stepped-up basis equal to the fair market value on the date of death. For Bitcoin purchased years ago at a fraction of current value, the embedded gain is enormous — and it disappears entirely at death under current law.

This is the foundational reason to borrow rather than sell for Bitcoin families with long-term estate planning intent. Every unit of Bitcoin sold converts a potential stepped-up basis asset into a current tax liability. Every unit of Bitcoin retained and borrowed against preserves that stepped-up basis opportunity — for as long as the Bitcoin is held, potentially decades.

The math is stark: a family holding 10 BTC with a $50,000 cost basis and current value of $700,000 per BTC holds $7,000,000 of Bitcoin with $6,500,000 of embedded gain. Under §1014, if they hold this Bitcoin until death, their heirs receive it at a $7,000,000 stepped-up basis — the $6,500,000 gain is permanently extinguished. If instead they sell $3.5M worth of Bitcoin to fund estate planning contributions, they permanently trigger $3.25M of realized gain at potentially 37%+ total effective rates — over $1.2M in taxes — and forfeit the stepped-up basis on the sold units.

The collateral loan allows them to fund those same estate planning contributions using borrowed dollars, while keeping the full Bitcoin position alive for the stepped-up basis event.

Using Loan Proceeds to Fund Irrevocable Trust Contributions

One of the cleanest applications of Bitcoin borrowing in estate planning is using loan proceeds to fund irrevocable trust contributions. A family might:

1. Hold Bitcoin directly — keeping the stepped-up basis opportunity alive
2. Borrow against the Bitcoin at 40–50% LTV
3. Gift the loan proceeds to an irrevocable trust (using lifetime exemption for large gifts)
4. The irrevocable trust invests the gifted cash, growing outside the taxable estate
5. Bitcoin continues to appreciate in the individual's estate, heading toward a stepped-up basis event

This structure achieves two goals simultaneously: it removes cash from the estate (growing outside the estate in the irrevocable trust) and preserves the Bitcoin position for the stepped-up basis. The loan interest is the cost of this strategy — but it is far lower than the capital gains tax that would have been triggered by selling.

Loan Against Bitcoin in a Trust — Trustee Authority Required

If the Bitcoin is already held inside a trust — whether a revocable living trust, irrevocable Bitcoin trust, dynasty trust, or other structure — the trustee must have explicit authority to pledge trust assets as collateral for borrowing. This authority is not always implied from general investment powers.

Under the Uniform Prudent Investor Act (UPIA), trustees have broad investment authority — but pledging is a form of disposition, and many courts have interpreted trustee borrowing authority narrowly without explicit trust language. Best practice is to include explicit language in the trust document authorizing:

• The trustee to pledge trust Bitcoin as collateral for loans
• The trustee to enter into loan agreements on behalf of the trust
• Specific limits or requirements (maximum LTV, minimum margin call notice, lender approval standards)
• Prohibition on loans that would require the trustee to pledge Bitcoin in a rehypothecation arrangement without trustee consent

For grantor trusts (where the grantor is treated as the owner for income tax purposes), additional analysis is required: self-dealing rules, UPIA compliance, and whether the loan arrangement could be characterized as a distribution rather than a borrowing for tax purposes. Trust counsel should review any collateral loan arrangement involving a grantor trust.

Loan Paydown Strategies

How the loan is ultimately repaid matters as much as how it is taken out. Options include:

• Paydown from income: Use investment income, business distributions, or other non-Bitcoin cash flows to pay down the loan over time. Preserves the full Bitcoin position.
• Paydown from trust distributions: If loan proceeds were contributed to an irrevocable trust, future trust distributions can be used to service the loan — though this requires careful analysis of beneficiary rights and trust terms.
• Paydown from Bitcoin sale at death: The family intends to hold the Bitcoin indefinitely; at the insured's death, the estate uses the stepped-up basis Bitcoin to repay the loan (now at a $0 capital gain basis), and passes the remainder to heirs.
• Refinancing: If interest rates change materially, refinancing the loan with a different lender can reduce the ongoing carrying cost.

The Margin Call Risk — How to Manage It

Margin call risk is the primary structural risk of Bitcoin collateral loans and the reason many financial advisors caution against them. It is a legitimate risk that requires systematic management — not avoidance of the strategy, but disciplined implementation.

The Math: Bitcoin from $70K to $35K

Illustrative scenario. A family borrows $500,000 against $1,000,000 of Bitcoin at $70,000 per BTC (approximately 14.3 BTC pledged). Initial LTV: 50%. The lender's margin call threshold: 75% LTV.

Bitcoin falls from $70,000 to $46,667 per BTC (a 33% decline):

• Collateral value: 14.3 BTC × $46,667 = $667,333
• Outstanding loan: $500,000
• LTV: $500,000 / $667,333 = 74.9% — approaching margin call threshold

Bitcoin falls further to $35,000 per BTC (a 50% decline from origination):

• Collateral value: 14.3 BTC × $35,000 = $500,500
• Outstanding loan: $500,000
• LTV: $500,000 / $500,500 = ~99.9% — well past margin call threshold

In this scenario, the lender would have issued a margin call when LTV approached 75% — around Bitcoin price of $46,667. The borrower would have needed to post additional collateral or repay loan principal. If they couldn't, the lender begins liquidating Bitcoin — triggering capital gains on the liquidated units.

Defensive Strategies

Over-collateralization. Borrow at 30–40% LTV instead of 50–70%. At 33% LTV ($333,333 borrowed against $1,000,000 of Bitcoin), a 50% Bitcoin price decline still leaves the LTV at 66% — below most margin call thresholds. This dramatically reduces margin call risk at the cost of lower borrowing capacity.

Keep dry powder. Maintain a cash reserve equal to 20–30% of the outstanding loan balance specifically to meet margin calls without liquidating Bitcoin. This is a liquidity buffer, not idle cash — it sits in short-duration Treasuries or money market funds and is deployed only if Bitcoin falls and a margin call triggers.

Loan paydown triggers in the Investment Policy Statement. Codify in the family's IPS: if Bitcoin price falls more than X%, reduce the loan balance by Y%. This creates a systematic, emotion-free response to Bitcoin price declines before the lender forces one.

Monitor LTV in real time. Most institutional lenders provide LTV monitoring dashboards. Set personal alert thresholds 10–15% above the lender's margin call threshold to give yourself action time before the lender acts.

Hedging. For large loan positions, consider purchasing Bitcoin put options with strikes near the margin call threshold. This provides insurance against catastrophic Bitcoin price declines that would force collateral liquidation. The cost of the puts is the premium paid for the insurance — worth modeling against the tax exposure of forced liquidation.

Rehypothecation Risk

Rehypothecation is when a lender takes your pledged Bitcoin collateral and uses it as collateral for the lender's own borrowing — effectively lending out your Bitcoin to generate additional lending capacity or yield. This transforms what should be a secured loan (your Bitcoin is set aside, waiting for you) into an unsecured counterparty exposure (your Bitcoin is circulating in the lender's treasury operations).

The BlockFi and Celsius Lesson

Both BlockFi and Celsius engaged in extensive rehypothecation of customer Bitcoin. When they faced liquidity crises in 2022:

• Customers who had pledged Bitcoin as collateral for loans found their collateral entangled in the lenders' bankruptcy proceedings
• Customers in "earn" accounts (who had lent Bitcoin to the platforms for yield) became unsecured creditors — receiving cents on the dollar after years of bankruptcy litigation
• The line between "my Bitcoin is held as collateral" and "the lender owns my Bitcoin as a creditor" collapsed, because the lender had commingled and rehypothecated the assets

The lesson is not that Bitcoin collateral loans are inherently dangerous. The lesson is that lender selection based on custody model and rehypothecation policy is a non-negotiable first filter. A lender that holds your Bitcoin in a multi-sig arrangement where they cannot unilaterally move it — like Unchained Capital's collaborative custody model — cannot rehypothecate your collateral, by design. A lender that holds your Bitcoin in an omnibus account is rehypothecating it unless they explicitly contractually prohibit doing so and have auditable proof of segregation.

Non-Rehypothecation vs. Rehypothecation Lenders

For estate planning applications — where Bitcoin is a generational wealth asset, not a trading position — non-rehypothecation is the only acceptable model. The marginal interest rate savings from a rehypothecating lender do not justify the counterparty risk on a position that may represent the family's entire Bitcoin inheritance.

Bitcoin Loans Inside Trusts

As more Bitcoin-wealthy families hold their Bitcoin inside trust structures — revocable trusts for probate avoidance, irrevocable trusts for estate tax planning, dynasty trusts for multi-generational wealth transfer — the question of whether the trustee can pledge trust Bitcoin as collateral becomes practically significant.

Trustee Authority Under UPIA

The Uniform Prudent Investor Act (UPIA), adopted in some form in nearly all US states, gives trustees broad investment authority including the authority to invest, manage, and retain assets. However, UPIA's investment authority does not automatically include pledging authority. Many trust attorneys take the position that pledging trust assets as collateral is a form of encumbering trust property — which may require explicit authorization in the trust document beyond general investment powers.

Some states' trust statutes provide explicit authority to trustees to borrow and pledge trust assets. Check the applicable state law and the specific trust document before attempting to pledge trust Bitcoin as collateral. If authority is ambiguous, a petition to a court for instructions or a trust modification through the trust protector mechanism is the appropriate path.

Trust Document Language for Bitcoin Pledging

For trust documents being drafted or amended, include explicit language such as:

• "The Trustee shall have the power to borrow money for any trust purpose and to pledge trust assets, including digital assets and Bitcoin, as collateral for such borrowing."
• "The Trustee may enter into digital asset lending and collateral arrangements with qualified institutional lenders, provided that any collateral arrangement shall prohibit the lender from rehypothecating pledged trust Bitcoin without prior written consent of the Trustee."
• "The Trustee shall maintain a maximum loan-to-value ratio of [X]% on any Bitcoin collateral loan and shall have authority to post additional collateral or repay loan principal to cure any LTV breach."

Self-Dealing Rules for Grantor Trusts

For grantor trusts — where the grantor is treated as the owner for income tax purposes — the grantor's personal transactions with the trust are generally non-events for income tax (grantor-to-trust sales are tax-free for income tax purposes under the grantor trust rules). However, self-dealing rules still apply for estate tax purposes under IRC §2036 and §2038. If the grantor borrows from the trust, receives trust assets as loan collateral, or engages in transactions that could be characterized as retaining economic benefit in the trust, there are estate inclusion risks. Trust counsel should analyze any transaction between a grantor and a grantor trust before execution.

Beneficiary Consent

For trusts with multiple beneficiaries, pledging trust Bitcoin as collateral for a loan that benefits one beneficiary (or the trustee personally) implicates fiduciary duty obligations to all beneficiaries. The trustee must analyze whether the borrowing is consistent with the trust's purposes, whether it adversely affects remainder beneficiaries (who bear the risk if the collateral is liquidated), and whether formal consent from beneficiaries is required under the trust terms or state law. For discretionary trusts with a single current beneficiary class, the analysis is more straightforward — but should still be documented in trustee records.

PPLI Policy Loans vs. Bitcoin Collateral Loans

Both PPLI policy loans and Bitcoin collateral loans allow families to access liquidity without selling Bitcoin. They operate very differently and suit different situations.

Combined Strategy

The most sophisticated Bitcoin families may use both structures simultaneously. Bitcoin held directly provides the stepped-up basis opportunity — and is borrowed against for near-term liquidity needs via collateral loans. Bitcoin held inside PPLI provides tax-deferred compounding and income-tax-free death benefit transfer. The two strategies are complementary: the PPLI handles the active management/compounding problem, while the direct-hold/collateral-loan strategy handles the stepped-up basis preservation problem. Together they address both the during-life and at-death dimensions of Bitcoin estate planning.

Frequently Asked Questions