The rise of Decentralized Autonomous Organizations (DAOs) as vehicles for owning both digital and tangible collectibles has introduced complex challenges for RIAs and wealth advisors.
As more high-net-worth clients participate in DAOs—particularly those holding valuable art, NFTs, and physical collectibles—advisors are increasingly tasked with bridging estate planning gaps in a space where technology, law, and tax policy often conflict.
DAOs like FlamingoDAO and PleasrDAO first captured attention during the NFT surge, pooling investor capital to acquire high-profile digital art. These models quickly evolved. Particle DAO fractionalized a Banksy painting; Arkive launched a decentralized museum where members vote on acquisitions spanning fine art to historical items.
These cases highlighted DAOs as serious stewards of cultural value—but also underscored how little traditional estate planning frameworks can accommodate this kind of collective ownership.
For wealth advisors, the first planning hurdle is defining what DAO membership means from an asset classification perspective. Many DAOs aren’t incorporated entities, which raises the question: does a client's interest count as equity, partnership, or merely intangible property? The classification drives how the asset is valued, taxed, and passed on.
If treated as a pass-through partnership, income and capital gains flow directly to members. If instead the tokens are seen as intangible property, they may fall under different estate and gift tax rules. For collectibles, IRS rules impose a 28% capital gains rate—an important detail when the underlying asset is artwork or memorabilia held within a DAO.
Ownership is only part of the equation. Control and access issues are equally critical. DAOs typically operate on smart contracts with token-based governance—systems that don’t align neatly with wills, trusts, or traditional fiduciary authority.
A named executor may have the legal authority to manage a decedent’s estate, but without access to private keys, they may be powerless to retrieve DAO-governed assets. Advisors must help clients identify secure but accessible methods for storing digital credentials and ensuring fiduciaries understand how to manage DAO assets within both legal and technical frameworks.
Smart contract automation can also create estate planning friction. Some DAOs are designed to trigger asset sales or distributions automatically based on tokenholder votes or timelines. These functions may conflict with probate procedures or trust administration, resulting in distributions that bypass estate planning altogether.
Advisors should coordinate closely with estate attorneys to build flexibility into planning documents—ensuring smart contract outcomes align with the client’s intent.
Valuation of DAO assets poses another layer of complexity. Traditional appraisal methods fall short when a client’s interest includes both a volatile token and a fractionalized share of a unique collectible. Advisors must consider dual-layer valuations: one for the market value of the token, and another for the collectible’s intrinsic worth based on provenance, rarity, and condition.
This process becomes even more challenging when illiquidity limits the ability to sell assets quickly to pay estate taxes or equalize distributions. Advisors should model potential liquidity shortfalls and explore strategies such as liquidity reserves or insurance to mitigate risks.
To effectively advise clients with DAO interests, RIAs should develop a working knowledge of DAO structures, token governance, and the tax implications of digital collectibles.
Collaborating with estate planning attorneys, CPAs, and digital asset custodians is key. Additionally, documenting asset access, reviewing DAO participation agreements, and integrating DAO interests into balance sheet reporting should become standard practice.
As DAOs continue to evolve and diversify their holdings, wealth advisors are uniquely positioned to guide clients through the emerging terrain of decentralized ownership and estate continuity. The goal is not only to preserve digital and physical wealth—but to ensure it transfers seamlessly, securely, and in line with client intent.
