It is well documented that all of our lives have become more data-driven and we are practically tethered to our electronic devices. Therefore, it should not be surprising to realize that more and more of our assets, and those of our clients, have a digital component. What may be surprising, however, is just how much value we place on our digital assets. Surveys report that the average value of personal digital assets owned by individuals globally ranges from $35,000 – $55,000.
A few key words typed into any search engine, including a review of articles written on this blog, will provide a wealth of information on accessing digital assets, including digital assets in your clients’ estate planning documents, and safeguarding your digital assets inventory. However, after the client’s death, once we have a list of their digital assets, and have gained access those assets, it is prudent for the probate and trust practitioner to remember to value those assets.
Many digital assets may have only sentimental value, such as photos on your smart phone. However, an increasing number of digital assets have an economic value, for example logos, libraries of digital music, Internet domain names and Bitcoin, to name only a few. If probate proceedings will be necessary, those assets with an economic value should be listed on the probate inventory. If a United States Estate (and Generation-Skipping Transfer) Tax Return (Form 706) will be prepared and filed, the digital assets need to be included. Digital assets should be reported on Schedule F (Other Miscellaneous Property Not Reportable Under Any Other Schedule) of the Form 706.
Digital assets are a complicated portion of the decedent’s tangible personal property holdings, which in general can be difficult to value. The methods to value digital assets are as varied as the types of digital assets themselves. Digital assets that are an online business should be valued by an appraiser. Other digital assets such as account credits with online retailers, balances in PayPal accounts, and cash-back rewards with credit card companies will be easier to assign a value.
As digital assets continue to become more common place, the locating, accessing and valuation of those digital assets should be a standard item on probate and trust administration checklists.