Our guest columnist, Albert Luk, returns to provide commentary on relevant legal issues.
When you calculate your net worth, do you include the value of your digital assets?
Digital assets describe the baskets of intangibles either online or in digital storage devices. Think of such items as one’s social media presence, on-line financial records and intellectual property (registered domain names, Google adsense accounts etc). A cursory review of this topic area typically involves, quite rightly, addressing digital assets in your estate plan.
Digital Assets and your net worth
However, equal emphasis should be given to digital assets in life. Specifically, some individuals may want to consider adding digital assets in calculating their net worth. Consider the following examples:
- Online currency has real world value: Second Life, the online virtual world, operates on currency known as Linden Dollars. These online currencies trade in the “real” world at a conversion rate of approximately $350-$250 dollars to 1 USD.
- Domain names are the new real estate: At the height of the Tea Party political movement, the Tea Party, a rock band who owned the domain name www.teaparty.com, were told their website could have been worth $1 million USD. As many bloggers also know, content rich websites have value for direct and online advertising potential. Some argue domain names are the 21st century version of the California gold rush – stake some real estate and hope you strike gold.
- Monies in non-financial institution accounts are often not reported or accounted for. Some users of Paypal or on-line gamblers park not insignificant amounts of money in such accounts. Individuals often do not report (accidentally or on purpose) such assets or list them on your net-worth statement.
I represent many clients who monetize or derive income online. In some cases, the value of such assets can form a significant part of their estate. If you are in this position, the next time you calculate your net worth do not forget to summarize your digital assets.
Digital Assets in Death
The flip side of the equation is executors’ having to deal with the challenges of digital assets in an estate planning context. The challenges are manyfold including: the executor not knowing where online bank accounts are located, social media sites not having policies to deal with users who are deceased and the practical challenge of not having logins and passwords to online accounts.
Law-makers have responded by enacting legislation to fill this void, mainly to address executors’ rights to control social media accounts. However, one should not assume that laws will be enacted in every jurisdiction to address this situation.
In such a legislative vacuum, the following best practices have emerged:
- Digital assets should be dealt with in wills. If the deceased sold spare golf clubs on-line, should the executor keep the business running until there is no further inventory? What do you do with Dad’s Facebook account? Does Mom want her blog about marathon running to be taken down or sold? These types of questions ideally should be answered in a will.
- Consider splitting the role of executor to deal with digital and non-digital assets. A technologically challenged executor may not be able to deal with all the issue of dealing with digital assets. Take, for example, an executor who has never heard of twitter or instagram who now has to learn how to navigate through these sites.
- The testator (aka the will-maker) should keep an inventory of digital assets in much the same manner as hard assets. The testator should keep an inventory of email address, domain names registered, social media accounts and digital devices and should update this inventory from time to time.
- Password safes are highly encouraged. A password safe permits a user to provide a master password to have access to all accounts listed. Suffice to say, it will make it easier for the executor to track down bank statements, on-line bills etc.
- Control of physical hardware allowing access to digital assets is key. Just as an executor may want to change the locks on the deceased’s home, they may also want to take possession of all computers, phones and tablets which may contain access to digital assets.
In conclusion, digital assets are playing a larger role in life and can cause headaches in death. Individuals who own digital assets and executors best to be prudent and take a proactive approach to this issue.
Albert Luk is a lawyer at Devry Smith Frank LLP, a Toronto based law firm who act as trusted advisors and advocates for corporations, individuals and small businesses. Albert can be reached directly at firstname.lastname@example.org or @acsluk on Twitter.
The above blog post is for general information purposes only and does not constitute legal or other professional advice or an opinion of any kind. Readers are advised to seek specific legal advice regarding any specific legal issues.