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Don't Leave Digital Assets Out of the Estate Plan
Author: Scarinci Hollenbeck, LLC
Date: July 8, 2013
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When it comes to formulating an estate plan, many individuals focus on the assets that hold direct monetary value, such as cash, retirement accounts, life insurance, trusts, real estate, and physical property. Many affluent individuals and business owners rely on trusts or the use of the lucrative gift tax law to transfer these assets to beneficiaries and lower their taxable estate. However, one component many people forget to account for revolves around their digital assets, which are all too often left out of their formal estate plan.
Digital assets can cover a wide variety of ground, and may encompass everything from email and social media accounts, software licenses, blogs, images and music, and financial accounts. This information may be stored on several different cloud portals, such as desktops, laptops, tablets, storage devices, and smartphones.
Because digital assets can hold both sentimental and monetary value, it’s crucial to draw up a beneficiary plan for these items to help the estate process go by more quickly and avoid disputes among family members that could tie up the process. For example, individuals who have underage children or a combination of biological children and step-children may have specific instructions about who retains the rights to certain digital assets. In some states, default laws may not automatically favor kids under 18 or make provisions for step-children who have not been adopted by the deceased individual. Therefore, having a legal document drawn up and included in an estate plan can provide more clarity if ownership disputes arise.
Some digital assets are increasingly coming up tax scrutiny, such as the ownership of Bitcoins. This digital currency is currently on the Internal Revenue Service’s radar as the agency attempts to establish new rules regarding its tax treatment. Owners should take the evolving scope of tax law into effect when making decisions about digital assets that may one day hold monetary value.
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