A leading American multi-family office calls attention to financial and legal problems XRP investors could face when XRP reaches higher targets.
Notably, XRP and the broader crypto market have remained in a downtrend over the past few weeks. Despite this, many investors have insisted that XRP will eventually recover, with some still discussing lofty targets such as $100.
However, Digital Ascension Group (DAG), a family office that supports high-net-worth families with wealth protection and planning, recently warned that many XRP holders may face serious problems before they enjoy those gains.
How the 2014 IRS Rule Affects Your XRP Holdings
The firm explained that most retail investors overlook how U.S. tax rules treat cryptocurrency. For context, in 2014, the IRS released Notice 2014-21, which officially labeled crypto as property instead of currency.
This rule means every sale, trade, or everyday purchase made with crypto counts as a taxable event. Specifically, investors must calculate gains or losses using fair market value at the time of each transaction and track the cost basis carefully, even for small purchases.
Digital Ascension Group noted that many people who hold six- or seven-figure XRP portfolios do not understand what this means for them. The firm noted that it often meets families who store large amounts of XRP in personal cold wallets without any legal structure to protect those assets.
They warned that a single lawsuit can put those personal holdings at risk. For instance, if someone sues an investor over a property injury, a car accident, or a business dispute, the court can request full disclosure of all assets under that person’s name. Judges can also order investors to surrender wallet keys.
Some investors think they can simply claim they lost access, but DAG stressed that courts can punish them with contempt charges, and some individuals even face jail time while their assets remain frozen.
Efficient Wealth-Planning Tools
Despite these risks, Digital Ascension Group said the IRS’s property classification also allows for efficient wealth-planning tools, many of which wealthy real-estate families have used for generations.
One example is the step-up basis at death. Specifically, if someone buys XRP at $0.50 and later dies when XRP trades at $100, their heirs inherit the asset at the $100 value and owe no capital-gains tax on the increase.
The firm also encouraged investors to borrow against their XRP instead of selling it. This gives them liquidity while they keep ownership and avoid an immediate tax bill.
Digital Ascension Group compared this method to strategies used by major entrepreneurs. They particularly pointed to billionaire Elon Musk, who borrowed roughly $40 billion against Tesla stock to help finance his purchase of Twitter (now X).
Using a Wyoming LLC to Protect Your XRP Assets
In addition to this, the firm recommended placing XRP and crypto holdings inside a Wyoming LLC to strengthen asset protection.
This structure will help with charging-order protection, which shields the assets from creditors. Notably, creditors can only wait for distributions that the LLC does not have to issue. The legal barrier protects the investor while keeping full control with the LLC.
DAG also highlighted the ability to gift up to $13.6 million to family members tax-free, or $27.2 million for married couples who file Form 709. Using this will allow families to transfer wealth out of their taxable estates during their lifetime.
Digital Ascension Group then suggested placing the LLC within a revocable living trust. When the owner dies, the surviving spouse immediately becomes the trustee and gains control of the assets. This typically avoids probate, which can take between six and twenty-four months and cost three to seven percent in fees.
The firm said it has watched families lose fortunes because they kept assets in their personal names and waited too long to secure protection. It stressed that successful families build their structures early, document all decisions properly, and move their crypto into insured, bankruptcy-remote institutional custody.
DisClamier: This content is informational and should not be considered financial advice. The views expressed in this article may include the author's personal opinions and do not reflect The Crypto Basic opinion. Readers are encouraged to do thorough research before making any investment decisions. The Crypto Basic is not responsible for any financial losses.
