Yes, where the instrument authorizes it and the trustee can actually sign. Those are separate conditions and both have to hold. Selling is an exercise of discretion, so the exposure is not the price achieved but whether the decision was within authority, considered properly, and recorded at the time.
Part of our guide: Crypto Estate Planning.
The short version
- Authority first. A trustee who cannot point to a power to sell has a problem before price is discussed.
- Capability second. Authority to sell means nothing without access to the key or the custody account.
- The duty is about process, not outcome. Selling before a rise is not a breach; selling without considering the trust’s purposes may be.
- Tax lands inside the trust unless income is distributed, and trust brackets compress fast.
- Not selling is also a decision, and an undocumented one is harder to defend than a documented sale.
The two conditions
Authority. Most instruments grant a general power to sell trust property, and the question is whether the drafting reaches digital assets and whether any specific restriction applies. Some instruments direct retention of particular assets, which changes the analysis entirely: a trustee who sells against a retention direction has a real problem regardless of the result.
Capability. The trustee needs to be able to execute. For custodied assets, that means being the authorized person on the account. For self-custodied assets, it means access to key material that actually works. A trustee with full authority and no access controls nothing, and discovering that during a sale is the wrong time.
Verify capability before it is needed. A trustee who has never executed a transaction on the trust’s holdings does not know whether they can.
What the duty actually asks
Not whether the price was good. Whether the decision was made properly.
That means considering the trust’s purposes, the beneficiaries’ circumstances, the role of the asset in the portfolio, any distribution needs, and the tax consequences. It means acting within the instrument. And it means recording what was considered, at the time.
A trustee who sold and the asset then rose is in a strong position if the file shows why. A trustee who sold and the asset fell further is in a weak position if the file shows nothing, even though the outcome was good.
The same logic applies in the other direction, which trustees underestimate. Holding is a decision. A concentrated position retained through a long decline, with no record of the position ever being considered, is a harder conversation than a documented sale.
The tax consequence lands inside the trust
A sale inside a non-grantor trust produces gain taxed at trust rates, and those compress sharply. For tax year 2025 the 20% capital gains rate applied to estates and trusts with income above $15,900 (IRS, Form 1041 instructions), a level an individual would clear only at far higher income.
Two practical consequences. Distributing to beneficiaries in lower brackets is frequently the better answer where the instrument permits it, so the distribution provisions matter as much as the power to sell. And timing across tax years can be worth real money on a large gain, which is a legitimate factor to weigh and to record.
Basis matters too. Assets that came in by gift carry over the donor’s basis, so a long-held low-basis position can produce far more gain than the trust’s own holding period suggests.
What I actually see
Trustees ask whether they are allowed to sell and rarely ask whether they are able to. The authority question gets a lawyer’s answer and the capability question gets assumed, and the assumption fails at the moment it matters.
The second gap is the tax modeling. A sale gets executed for sound investment reasons and the trust-level tax arrives as a surprise the following year, at rates nobody looked up, with no distribution made that would have reduced it.
The third is the undocumented hold. Trustees worry about being criticized for selling and forget that not selling is equally a decision. If a concentrated position is being retained deliberately, say so in the file, with the reason, and revisit it on a schedule.
The practice worth adopting: before any material sale, one page covering authority relied on, purposes considered, tax modeled, alternatives weighed, and the decision. It takes minutes and it is the entire defense.
Where this goes wrong
The sale is fine and the record is not.
The specific failures: selling under an instrument with a retention direction nobody read. Discovering at execution that the trustee is not the authorized signer on the custody account. Trust-level tax unmodeled, with no distribution made. A partial sale with no record of how the lots were identified, so basis becomes contestable. And a long hold through a decline with no evidence anyone ever considered the position.
The decision rule
- Confirm the power to sell and any retention direction, in writing.
- Verify capability before you need it: test a small transaction if you never have.
- Model the tax before executing, including whether a distribution is better.
- Record the decision with authority, purposes, tax, alternatives, and reasoning.
- Identify the lots and record how, since basis depends on it.
- Document a decision to hold on the same standard as a decision to sell.
- Set a review date, so retention stays a choice rather than a default.
Where this sits
Selling is where trustee authority, custody access, and tax meet at once. Trustee liability is the exposure. Documenting decisions is the defense. Valuation is what the record depends on. Whether the trust can hold the assets is the authority underneath all of it.
A sale is the moment every earlier decision gets tested at once, which is why the preparation matters more than the timing.
Sources
- IRS, Instructions for Form 1041, estates and trusts
- Wyoming Uniform Trust Code, Wyo. Stat. Ann. Title 4, Chapter 10 (Wyoming Legislature)
- Uniform Prudent Investor Act (Uniform Law Commission)
- IRS, About Form 8949, Sales and Other Dispositions of Capital Assets
- IRS, Digital assets
- Wyoming digital asset statutes, Wyo. Stat. Ann. §§ 34-29-101 to 34-29-102
Related
- Can a trustee be liable for crypto losses?
- How should a trustee document crypto decisions?
- How should trustees value crypto?
- Can an irrevocable trust own Bitcoin?
- Can a trustee hold a hardware wallet?
- Crypto trust structures
Last updated: 3 August 2026.
This article is general education, not legal, tax, or investment advice. Tax thresholds are indexed and change annually. Fiduciary obligations depend on your instrument and jurisdiction. Talk to a qualified estate attorney and CPA about your own situation.
