Digital Assets And Estate Planning

A young couple sits on one side of a table and an estate planning attorney on the other side with a computer to discuss digital assets and estate planning.

We live in a modern, digital world. As technology evolves, there is more access to intangible properties. Acquiring digital assets is more common than a decade ago. Many of these assets hold significant value and should be added to an estate plan. If you would like to learn more about digital assets and estate planning, consider scheduling a consultation with Loughlin Law, P.A., by calling (561) 677-8384.

What Is Included in a Traditional Estate Plan?

According to the American Bar Association (ABA), an estate plan fulfills an individual’s wishes after their passing. Along with that, it designates how assets will be passed to their heirs or beneficiaries. Traditionally, you will find the following in an estate plan:

  • A will outlines how a person’s assets should be distributed upon death. Also, it can designate guardians for minor children and specify funeral arrangements.
  • A trust is an arrangement that allows a trustee to manage assets on behalf of beneficiaries. 
  • The power of attorney document grants someone the authority to make financial or legal decisions on behalf of the individual, especially if they become incapacitated.
  • A healthcare proxy or medical power of attorney designates someone to make healthcare decisions on behalf of the individual if they are unable.
  • Beneficiary designations outline how certain assets, such as life insurance or retirement accounts, pass to specific people, per Florida Statute 732.703.

These components provide a legal framework for someone to manage their affairs and assets during and after their lifetime. While most of these assets in an estate plan are physical, digital assets can also be covered under these specifications. 

What Are Digital Assets in Estate Planning?

Overseeing digital assets and estate planning can be complex. They cover a wide range of online properties and holdings, such as: 

  • Email accounts 
  • Social media profiles
  • Cryptocurrency accounts
  • Digital subscriptions
  • Photographs
  • Media files such as music and films
  • Domain names

Unlike physical items, digital assets exist as data stored on servers or in the cloud. For these reasons, they need to be handled differently than traditional forms of property. Anyone who has these assets may want to create an inventory of them. Keeping track of all online accounts and electronic files can make it easier during the estate planning process. Along with digital assets, usernames and passwords should be added to documents for safekeeping. With that information, the intended recipients or beneficiaries will have access to those assets. 

How Do You Deal With Digital Assets on Death?

With any property, the goal of estate planning is to provide a smooth transition to a person’s heirs or beneficiaries. One of the first tasks is identifying and listing all of the person’s digital assets. This inventory will prevent any oversight in the estate settlement process. Also, access to digital assets is contingent on the policies of various platforms and service providers. Each entity may have protocols for managing the accounts of deceased users. As a result, it can make the process more complicated. Anyone with digital assets should familiarize themselves with the terms and conditions of these platforms. 

As with any type of asset, the estate owner will want to assign an executor as part of their estate plan. This person will be responsible for managing the estate’s digital assets. Make sure to choose someone who has a basic understanding of how to access online accounts and store or transfer data and files. The executor needs to be a person who is familiar with the latest technology. Otherwise, it could lead to lost data or unrecoverable files. If you want to make sure that your digital assets are protected in an estate plan, consider consulting an attorney at Loughlin Law, P.A. to discuss your estate planning needs.

Do You Want To Include Digital Assets in Your Residual Estate?

Unlike traditional physical property, digital assets are not always valuable. Anyone adding digital assets to their estate planning will want to account for both the financial and emotional aspects of their holdings. Both valuable domain names and cryptocurrency have a monetary worth. But private emails or digital photo albums are only priceless memories and therefore, might be better included in the residuary estate. When deciding what to do with the digital assets that are part of their estate, individuals need to weigh these factors.

The key to a successful estate planning process is honest communication. All individuals should discuss their specific digital assets with their heirs or beneficiaries, particularly any digital assets being left to a surviving spouse, children, or grandchildren in the residuary estate. That way, they can be more explicit about what they want for the future. Also, it lessens the possibility of disputes arising between beneficiaries. Establishing rules for transferring or storing digital assets allows the individual to ensure that their estate plans reflect their wishes.

Are Digital Assets Considered Property?

In most cases, digital assets are property. People can include them in their estate planning. Even though digital assets might not always fall under the umbrella of traditional property rules, owners still must assess their worth. The complications surrounding digital assets are starting to be addressed by the changing legal landscape. Some jurisdictions have even passed special laws to control how digital assets and estate planning are treated.

Are Digital Assets Taxable?

Capital gains tax may apply to some of these assets. Per the Internal Revenue Service (IRS), taxes may apply if their value changes, is sold, or is transferred. In addition, estate and inheritance taxes may be imposed on the entire estate value. Working with an estate planner can help you:

  • Transfer digital assets while you are still alive
  • Use available tax exemptions
  • Take charity contributions into account for your assets

Since digital assets may be more sentimental than valuable, owners will need to determine their worth. Specific valuation concerns can be resolved with the assistance of professional appraisals. With that, owners will be aware of these items’ actual value and know what can be passed to their heirs and beneficiaries. 

Consider Contacting a Florida Estate Planning Attorney

In today’s digital age, you need to think about digital assets and estate planning. You will want to thoroughly document all accounts and holdings to pass them to your beneficiaries properly. A Florida estate planning attorney may be able to assist in this process. An experienced probate lawyer may be in a position to help you ensure that all tangible and intangible assets end up in the right hands. If you would like to learn more, consider scheduling a consultation with Loughlin Law, P.A. by calling (561) 677-8384 today.

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