The world around us is rapidly changing as people gain more options for generating wealth and secure new digital valuables, even as long-term investments. Options for software-produced services online will no doubt expand into the next decade for the mobile experience-focused customer. Cryptocurrency will most likely play a pivotal role in how digital assets become legally protected for the foreseeable future.
Surprisingly, state lawmakers have taken the lead in regulating how virtual currency is defined and reported for taxes. The IRS defines cryptocurrency as property, but there is presently no clear federal directive from the US Comptroller of Currency. Legally speaking, digital assets are still a loosely defined group of valuables which gives a good reason to begin making concrete plans on how to protect them. As an investor, it is more crucial than ever to document who will benefit from your digital assets after death. Here’s what you need to know about ensuring your digital assets are well-managed.
Choosing an executor to manage your digital assets after death
When you speak to an attorney about your estate, you will be required to choose an executor. The executor is responsible for following through on instructions in your will about how your assets should be handled once you are gone. When you review your estate, you will have the opportunity to detail all accounts, beneficiaries, heirs, requirements, and responsibilities in your will.
You cannot pass legal control of social media accounts, photos, email, or subscriptions to your executor. These online services are generally the property of the issuing company and end-user agreements cannot be transferred to someone else. Further, they do not hold monetary value. The only concern of your estate are assets of value. If you want a beneficiary to access a trove of family photos, you will need to provide your account log-in information to your executor separately.
As grantor, you can proactively define the beneficiaries to your assets and financial accounts. You can include names and social security numbers when you first open an account, or you may choose to add and update them as needed. Insurance policies, retirement accounts, brokerage accounts, and even margin accounts should present this option. When you create your will, you can organize and simplify these details for your loved one or family member.
What happens to cryptocurrency assets after death?
As previously mentioned, The Feds haven’t defined a set of rules on how cryptocurrency should be valued. The IRS views virtual currencies as taxable intangible property, but not as currency or a capital fund. Therefore, you can’t combine cash and the value of your Bitcoin (BTC) account on your taxes or in your will as cash or cash equivalent yet. Be sure to include the name, social security number and date of birth of your executor in your cryptocurrency brokerage and savings accounts.
Passive income – ad royalties and subscription revenue
Some people become social media influencers and make an income from their viewership doing so. Online services such as YouTube and Instagram pay successful business account holders when they become experts at drawing visitors to their sites. They get paid on everything from “likes,” “views,” to the number of subscribers to their channels. If you are one of the lucky few or think you may one day become an influencer, congratulations! You may need to account for passive income from ad royalties or paid subscriptions to instructional videos or mobile games you create.
Small business accounts receivable
Millions of small business owners around the world sell their goods online and receive customer payments digitally. If you sell goods online, especially through an automated supply and shipment service, then your successor will need to be able to access revenue from your accounts receivable. Some of the major global marketplaces for small business transactions include Square, Amazon, and PayPal.
You worked hard to create a successful internet-based company. As a small business owner who predominantly sells online, consider speaking to your financial advisor about your business as a digital asset after death. Whether you want your executor to wind down or sell your company after you pass away or you want someone else to take it over, you need to clearly document everything in your will.
Digital asset wealth management
Putting together a will is indeed a lot to think about on top of your other commitments It isn’t always easy to put together your end of life plan, but doing so will immensely ease the burden on your loved ones and beneficiaries after your passing, and will ensure that all of your assets and accounts are settled in the way you would want them to be.
You, of course, also need to include your portfolio of investments, real estate, and other assets into your will with digital assets after death. An experienced wealth manager can work with your attorney or recommend one for you to complete the process. Once you take the critical step of establishing a will, then making changes becomes much simpler and quicker later. A firm like SD Mayer has decades of experience in business advisory, accounting, estate planning, and tax services in the San Francisco area to help you will every aspect of your financial management.
SD Mayer, located in the heart of San Francisco’s Financial District, has a team of compassionate and experienced wealth managers who can help you create a plan for your digital assets after death. If you are working on your estate planning or will, contact us to set up an initial consultation.