NFTs are digital assets that represent real-world items like art, music, games, cards, or other collectibles— and while exciting to collect, NFT's can be difficult to transfer upon death.
But not to worry... we cover all of that (and more) in this complete guide to inheriting NFTs.
So let's jump in at the beginning: What is an NFT?
What is an NFT?
NFT stands for “Non-Fungible Token.”
If that explanation doesn’t help, don’t worry—here’s another way to think about it:
NFTs are digital assets that represent real-world items like art, music, games, baseball cards, or other collectibles. These digital assets are bought and stored through blockchain technology.
NFTs are digital assets that represent real-world items like art, music, games, baseball cards, or other collectibles. These digital assets are bought and stored through blockchain technology.
Blockchain is commonly associated with Bitcoin and other cryptocurrencies. At its core, blockchain is a digital ledger that documents transactions and tracks assets.
Are NFTs valuable?
We know what you might be thinking: why would a probate and estate settlement company be interested in NFTs?
Well, for the same reason that you’re likely reading this article: because NFTs can be very, very valuable. Inheriting an NFT could change your entire life—and the lives of generations to come.
Like other valuable artwork and collectibles, NFTs are priced solely on subjective taste and the demand for that specific item.
What makes the Mona Lisa so valuable? It’s just a piece of art in the Louvre, right?
Yes, but it’s one of a kind. It’s irreplaceable. It’s rare. We would all love to have the Mona Lisa hanging in our living room.
NFTs are no different. The fact that NFTs are “non-fungible” means that they are unique and not interchangeable.
In 2021 and 2022, NFTs broke into the mainstream media when the digital assets began selling for wild amounts on online blockchain platforms.
We’re not talking just a few dollars. We’re talking about thousands, hundreds of thousands, and even millions of dollars.
For example: the most expensive NFT to date is The Merge, a digital painting by the artist Pak. How much did it sell for? $91.8 million.
Yeah, you read that right. Nearly ninety two million dollars: $91,800,000.00
9 most valuable NFTs ever sold
NFT's are much like crytocurrency in the sense that they have volatile market value prices and often explode or cool down rapidly. In fact, it's entirely possible that some news will break mere moments after writing this article announcing the next high-valued NFT auction or purchase. So for sake of disclaimers, consider yourself advised that these stats may change; however as of the publishing of this guide, these are among some of the most valuable NFT purchase/sale events to date:
- The Merge - $91.8 million
- Everydays (the first 5,000 days) - $69.3 million
- Clock - $52.7 million
- Human One - $28.9 million
- Cryptopunk #5822 - $23.7 million
- Cryptopunk #7523 - $11.75 million
- Cryptopunk #4156 - $10.26 million
- Right Click and Save As Guy - $7 million
- NFT Artwork Ringers - $6.93 million
That’s a whole lot of money—and the price of those valuable pieces of artwork is only expected to rise.
Inheriting NFTs seems a lot more interesting now, doesn’t it?
How to Inherit an NFT— Exact Steps & Tax Considerations
Here’s the main problem with inheriting NFTs, which you’ve likely already guessed: the assets are not tangible.
You cannot put an NFT in a safe, lock it in a safe deposit box, or lend it out to a museum—at least not in a physical fashion.
Why does all of this matter? Well, the digital nature of NFTs means that the assets are especially tricky to inherit. In fact, it’s estimated that potentially millions of dollars—if not billions of dollars—worth of digital assets are set to be unrecoverable if the current owners pass away without any named beneficiary and inheritance plan.
Because of the nature of digital assets, we must pay careful attention to the specific steps and tax implications involved in inheriting NFTs.
Let’s dive into the world of blockchain and NFTs:
Quick Facts About Inheriting an NFT
- NFTs stand for “non-fungible tokens”
- “Non-fungible” means that NFTs are unique and cannot be interchangeable
- NFTs are digital assets built on blockchain technology
- Blockchain is a digital decentralized ledger that records transactions and tracks assets
- NFTs are stored on specific blockchain platforms
- Those blockchain platforms require a password to access
- You receive a step up in basis when you inherit an NFT
- You may end up paying capital gains tax if you ever sell the NFT that you inherit
How to Inherit an NFT Checklist
- Read the deceased’s will to see if you are listed as a beneficiary.
- If you are set to receive an NFT, the will should identify the NFT and explain where the NFT is digitally stored.
- If you are not the executor, contact the executor to learn details about the blockchain platform, and if the deceased’s password is available.
- If there are any missing pieces that would prevent you from inheriting the NFT, consider consulting with a probate attorney.
- You will receive the NFT at the end of the probate process when all of the deceased’s assets are distributed.
- You will need to receive the deceased’s password from the executor to access the NFT.
- Research the NFT to understand its fair market value and the step up in basis that you will receive.
- Decide whether you want to keep the NFT or sell it.
- If you plan to keep the NFT, include it in your estate assets. You will want to ensure that the NFT passes on to your beneficiaries when you die.
- If you plan to sell the NFT, understand that you may be liable for capital gains taxes.
Terms You’ll See When Inheriting an NFT
Blockchain - A decentralized digital ledger that tracks assets and records transactions. Information is stored in blocks (hence the name “blockchain”). Those blocks have a set capacity for holding information, and once a block is full it links to the previously-completed block to form a chain.
Non-Fungible - An item that is unique and not interchangeable. Cash is fungible, because each dollar holds the same value and can be interchangeable. NFTs do not each hold the same value and are not interchangeable, so they are non-fungible.
Cost Basis - The original value or price of an asset for tax purposes.
Step Up in Basis - The new cost basis established from the asset’s fair market value on the original owner’s date of death.
Capital Gains - The profit made from the sale of a significant piece of property (a “capital” asset). NFTs will incur capital gains if you sell them at a profit.
Digital Wallet - A digital system that securely stores blockchain information.
Ethereum - A decentralized, open-source software built upon blockchain technology. Ether (ETH) is the cryptocurrency created on the Ethereum software. Most NFTs are created through Ethereum.
Web 3.0 or Web3 - While Web 2.0 refers to the current version of the Internet, Web 3.0 is a reference to the current work-in-progress towards the internet's next "iteration", which aims to be decentralized, open, and of greater utility. Early-adopters and blockchain advocates are coining Web 3.0 as a new, decentralized version of the internet fully supported by blockchain technology. The web 3.0 movement is focused on data ownership, transparency and increased freedom of use.
How to Inherit a NFT — An Expert Breakdown
We mentioned earlier that millions of dollars worth of NFTs are set to be unrecoverable if the current owners pass away without any named beneficiaries or inheritance plan. That number, although estimated, might be a bit low. Some experts claim that billions of dollars worth of NFTs will be lost.
How can that be the case?
It all comes back to the digital nature of NFTs. Let’s consider two examples:
Example 1: The Mona Lisa
Let’s say, for sake of argument, that the Mona Lisa was not stored at the Louvre in Paris. Instead, Leonardo da Vinci’s most famous work was owned by a wealthy billionaire.
The billionaire stored the Mona Lisa in a large safe, protected by fancy technology and locked away with a special safe combination that only the billionaire knew.
In an ideal world, the billionaire would share the combination to the safe with the executor of his estate before his passing. But what would occur in an ideal world does not often happen, and the billionaire never tells anyone else the combination.
The billionaire does create a will but then dies suddenly while yachting off the Amalfi Coast.
In the will, the billionaire left the Mona Lisa to his daughter. The probate process wraps up and the assets are set to be distributed, but there’s a problem.
No one knows the combination to the safe where the Mona Lisa is kept.
So what happens? Well, after a brief discussion with the probate court it is determined as permissible to hire experts to drill into the safe and remove the Mona Lisa.
The Mona Lisa is recovered and given to the billionaire’s daughter.
Example 2: CryptoPunk #7804
CryptoPunk #7804 is an NFT that recently sold for $7.57 million. The NFT features a pipe-smoking alien wearing a hat and sunglasses. Yeah, if you can’t imagine that in your head then you might need to just Google it.
Let’s say that a billionaire owns CryptoPunk #7804 and stores it in a digital wallet. This wallet is password protected, and only the billionaire knows the password.
In an ideal world, once again, the billionaire would tell another individual the password. But she never does.
The billionaire does create a will but then passes away suddenly while parasailing in Marbella.
In her will, the billionaire leaves the NFT to her son. The probate process wraps up and the assets are set to be distributed, but there’s a problem.
No one knows the password to the digital wallet where CryptoPunk #7804 is kept.
This is a tricky situation. There’s no digital asset, so the beneficiary cannot drill a hole in any safe to remove the artwork.
The artwork is on the blockchain and cannot be retrieved without a password. And, as any expert of blockchain technology would agree, one perk of blockchain is that it is very secure.
No amount of legal maneuvering, digital manipulation, or software engineering will be able to retrieve the NFT. It is unrecoverable without the password.
That’s what we mean when we say that millions of dollars worth of NFTs are potentially unrecoverable if the owners don’t establish an inheritance plan. If individuals die without sharing their passwords, there’s nothing that can be done to retrieve the digital assets.
The takeaway: know the NFT passwords
Of all the advice that we could give on inheriting an NFT, the one key takeaway is this:
You must know the deceased’s account password or have some way of accessing the NFT.
If you do not have the deceased’s digital wallet passwords, the NFT will be irretrievably... lost. 🥺
How an Inherited NFT is Taxed
Inherited NFTs are taxed like any other capital asset. You do not pay taxes when you inherit the NFT, but you might have to pay taxes if you ever decide to sell it.
We can think of the taxation of an inherited NFT in the following 3 steps:
- The NFT is included in the deceased’s taxable estate.
- You receive a step up in basis when you inherit the asset.
- You pay capital gains tax if you ever decide to sell the asset.
Let’s look at those 3 steps in more depth.
The NFT is included in the deceased’s taxable estate
Like most other assets that the deceased owned upon their death, NFTs will be included in the deceased’s taxable estate. This means that any taxes due upon the death of the original owner will be paid out from the estate.
Are there exceptions to this rule? Absolutely.
If the NFT is held in an irrevocable trust—which would avoid probate—then the NFT would pass directly to the beneficiary and would not be included in the deceased’s taxable estate.
You receive a step up in basis when you inherit the NFT
One of the perks of inheriting an NFT is that you receive a step up in cost basis when you inherit the asset.
The basis is calculated from the NFT’s fair market value at the original owner’s date of death.
What does all of this mean, exactly?
Well, an asset’s cost basis is the original value or price of an asset for tax purposes. When the state or federal government is trying to determine how much you owe in taxes on an NFT, they will look at how much the asset has risen in value from that original cost basis.
Let’s look at an example of a step up in cost basis:
Patricia, a widow, buys an NFT in 2016 for $500,000. The original cost basis when Patricia buys the NFT is the NFT’s fair market value—$500,000.
Patricia passes away in 2022, and her daughter, Kim, is named as the inheritor of the NFT. On the date of Patricia’s death, the NFT’s fair market value was $750,000.
Kim receives a step up in basis, meaning that the NFT’s new cost basis when she inherits the NFT is $750,000, not the old cost basis of $500,000. If Kim ever decides to sell the NFT, she will be liable to pay for the gains accrued from that initial $750,000 basis.
That’s a perfect transition into our next point:
You pay capital gains tax if you sell the NFT
We know that you receive a new cost basis (a step up in basis) when you inherit an NFT. But what if you inherit the NFT, hold onto it for five years, and then decide to sell it?
You will owe taxes on the gains accrued off of the initial cost basis when you inherited the NFT.
Let’s take a look back at our example of Kim.
Kim inherits the NFT in 2022 at a cost basis of $750,000. In 2025, Kim decides to sell the NFT. By this point, the NFT is now worth a fair market value of approximately $950,000.
Kim is liable for the capital gains accrued on the NFT—so she’ll end up paying taxes on the difference between $950,000 and her basis of $750,000, or $200,000.
So remember: just because you inherit a NFT doesn’t mean you won’t be off the hook for any taxes if you ever decide to sell the NFT in the future. You will still be liable for taxes on any capital gains accrued.
How to Get Access to an NFT You Inherited
As we have stressed continuously, the most important aspect of inheriting the NFTs is knowing the deceased’s password or digital wallet information to access the digital assets.
In an ideal situation, the executor will have the digital platform information or password information and give you that information when the estate assets are distributed to beneficiaries.
You should then be able to use that information provided by the executor to access the NFT.
But what if that doesn’t happen? What if the executor does not have the digital platform information?
You will then need to do some research.
If you know that you are set to inherit an NFT but cannot find the original owner’s digital information, you need to coordinate with the executor to complete the following steps:
- Search for password information among the deceased’s private papers, safe deposit boxes, notes, letters, and even digital files.
- Determine the digital wallet or digital platform that the deceased used to store the NFT.
- If possible, contact the digital platform to request information on receiving an NFT.
Search for password information to the NFT wallet
To begin searching for the deceased’s password information, your first step will be to coordinate with the executor and see what information they have already compiled.
At this point in the probate process, the executor should already have court-approved access to all of the deceased’s personal notes, letters, files, and even digital files and emails. If you are the executor and are also set to receive the NFT, you will need to ensure that you have court approval before you begin digging into the deceased’s personal files.
There’s a strong chance that the deceased’s NFT password will be physically recorded or can be traced to digital files. If that is the case and you locate the password, then you should be able to access the NFT relatively easily.
If the password cannot be located, then you need to move to the second step.
Determine the NFT platform hosting the asset
The NFT might be stored in a digital wallet, in an InterPlanetary File System (IPFS), or in a hardware wallet. And yes, we promise that we didn’t make all of those terms up.
There are a number of popular digital wallets that are used to store NFTs. Let’s take a look at some of the most popular NFT wallets.
8 Popular NFT wallets
Below are the 8 most popular digital wallets commonly used to store NFTs:
Without getting too deep in the weeds, it’s also possible that the NFT could be stored on one of the many popular NFT marketplaces.
9 Popular NFT marketplaces
Below are 9 of the most popular NFT marketplaces to purchase and sell NFTs:
If the deceased didn’t store NFTs in a digital wallet, IPFS, or hardware wallet, then it’s likely that the NFT could be stored on one of those platforms.
Contact the digital platform
If you know the platform where the NFT is located—like OpenSea or Rarible—but cannot retrieve the NFT because you do not know the original owner’s password information, you should contact the platform directly to see if the platform hosts have any advice on retrieving the digital asset.
Many of the larger NFT platforms pride themselves on high-quality customer service, and the majority of the platforms have customer service resources available on their websites.
Fair warning, though—it is very unlikely that you will be able to retrieve the NFT without any password information.
How to Transfer Ownership of an NFT You Inherited
Unlike a house or parcel of land, where you need a deed and title to prove your ownership over the real estate, an NFT is slightly different.
The only way that you can prove that you own an NFT is by owning the blockchain information that the NFT is built upon. If you don’t have a password to the digital wallet or platform where this blockchain information is stored, you cannot prove ownership over the NFT.
Once again, the key ingredient is simple: if you can access the digital wallet or platform where the original owner stored the NFT, you can claim ownership over the asset.
Everything You Need to Transfer an NFT
We cannot stress this enough, so we will say it one more time: you must receive the password to the digital wallet or platform where the original owner stored the NFT.
If you cannot access the digital wallet or platform, you can effectively kiss the NFT goodbye.
What to Do with The Money from an Inherited NFT
Inheriting an NFT can be a life-changing event when it comes to your own assets.
NFTs are based on subjective value, so there is truly no limit to the potential value of an NFT. Just as a piece of physical artwork can rise in value over the course of generations, NFTs can increase in value if there is high demand for the digital artwork.
One of the benefits of NFTs is how flexible they can be. Do you want to keep the NFT to pass it on to future generations? Do you want to sell the NFT and invest the profits in another sector?
To explain more about the concept of investing for future generations, we teamed up with our friends over at Finwell to focus on creating generational wealth. As you’ll see from our research, an asset like an NFT could have a significant impact on the legacy you leave to future ancestors.
Other Tips for Inheriting NFTs
- NFTs are complex assets. Make sure you do sufficient research on the asset’s value, blockchain technology, and digital storage information before you inherit an NFT.
- Make sure you sufficiently read the will to see if the NFT will be distributed through the deceased’s estate (going through probate) or through a trust (avoiding probate).
- Consider consulting a probate attorney if you need legal advice on inheriting an NFT.
FAQs When Inheriting NFTs
Are NFTs a safe asset to keep?
It depends on who you ask. Like other digital assets built upon blockchain technology, the value of NFTs as an investment option is somewhat controversial.
The assets are decentralized, meaning that no government or centralized entity backs the assets. That could be viewed as a good thing if you’re wary of assets backed by an entity or government.
Since they’re decentralized, though, the assets do carry more risk than alternative investments. U.S. Treasury bonds are backed by the U.S. government, for example, meaning that the bonds will hold their value unless the U.S. government defaults. Cash held in FDIC-insured checking and savings accounts within the U.S. is also protected for up to $250,000 per account—meaning that the assets are protected from the bank going out of business.
NFTs aren’t like that. NFTs are not FDIC-insured or backed by the U.S. government. As with any alternative investment, holding NFTs in your portfolio carries a risk that the asset will lose its value.
How can I sell an NFT that I inherited?
You can sell an NFT that you inherited on one of the NFT marketplaces that we listed earlier. If you hold the NFT in a digital wallet, you should be able to list the NFT from your wallet onto the marketplace.
From there, potential buyers can view your NFT and make bids on the asset. Once the NFT has been sold to a new buyer, you will receive cryptocurrency in exchange for the NFT that you just sold.
How do I know if I’ve inherited an NFT?
If you’ve inherited an NFT from a deceased individual’s estate, you should be notified by the executor of the estate that you are a beneficiary who is set to inherit an asset.
During the distribution of assets, the executor will contact you and give you the necessary information to retrieve the NFT that you have inherited.
What if I lose or forget the password for a digital wallet to access my NFT?
If you lose or forget the password to your digital wallet to access your NFT, you will unfortunately have a difficult time in regaining access to the asset. Some digital wallet companies have resources and personnel to walk consumers through the process of regaining access to the digital wallet.
As a rule of thumb, though, you should always keep a written record of the password in a safe deposit box or a secure location. This will ensure that you can easily access the digital wallet in the event that you lose or forget your password.
I’ve inherited an NFT but don’t have a digital password. What happens now?
This is the toughest situation that you might encounter when inheriting an NFT. It can be hard enough to regain access to your own digital wallet if you ever lose your password, but gaining access to a deceased individual’s digital wallet when you don’t have their password is next to impossible.
Don’t give up hope yet, though; you’ll need to work with the executor to determine the platform or wallet where the NFT was digitally stored and if there are any options for accessing the asset.
Are NFTs tax-free?
Not really. The NFT will likely be included as an asset in the deceased’s taxable estate, meaning that the estate might end up paying taxes on the asset before it is distributed.
When an NFT is distributed to you, however, you do not need to pay taxes upon inheritance.
You can hold on to the NFT without ever having to pay taxes on it, but you will have to pay taxes on the capital gains that accrue if you do ever decide to sell the asset. Although the asset is decentralized and not backed by a government entity, the government does want to know what assets you sell—and they will collect a portion of any profit you receive from the sale.
What if you’re inheriting more than NFTs?
Chances are you’ve inherited more than just NFTs, and most come with different nuances and considerations. We've written guides like this on a few major asset classes, and you can read those by going to the Inheritance Advice section of the Atticus® Executor's Resource Library.
