Protecting Your Digital Assets with a Revocable Trust
By Sofia Ziegler, Manager, Marcum Family Office
The digital transformation of our world has increasingly integrated content and experience, and in doing so has created the most mercurial of assets. The definition of a digital asset is changing as quickly as technology evolves, the one constant being the right of use. Even the social media applications that have become integral to our daily lives may contain proprietary information. Consequently, protecting and passing along information tied to your digital assets is now more crucial than ever before.
Information you store within online services may belong to you as a digital asset now, but without licensure these assets will often revert back to the technology company upon your passing. Since property under a will must be wholly held by the author of the will, information that is in part owned by a third party, such as a cloud-based storage server, would not be considered transferable through a will since it is not solely the author’s property to transfer. Additionally, platforms holding digital assets often have internal requirements to pass account access to a designated individual.
Protecting Your Digital Assets
Examples of digital assets currently include:
- Virtual currencies / cryptocurrency
- Non-fungible tokens (NFTs) / Crypto art
- Social media and email accounts
- Digital intellectual property (copyrights or trademarks)
- Photos, videos, or written works that produce income
- Multimedia libraries (digital music, books, and images)
- Domain names
- Photographs, records (medical or financial), and documents stored online (i.e., Google Docs, Dropbox, ShareFile, Flickr, etc.)
- Media and content published online (i.e., websites, blogs)
- Virtual financial and intellectual property held in online games (i.e., Minecraft, Fortnite, Call of Duty, etc.)
- Loyalty program benefits
This list continues to expand as the reach of digital assets grows, so it is important that the documents associated with your digital assets are continuously updated.
Holding your digital assets in a revocable trust can be an attractive option since, with the assistance of a trust and estates attorney, it can be easily updated as frequently as needed. Updates can be as small as a password change or as large as the acquisition of new assets, such as an NFT.
In order to establish the basis of the trust, ownership of your digital assets must be transferred to a license, which is then placed into the trust and managed as digital property. Prior to establishing a revocable trust to house your digital assets, consider the following questions:
- What digital assets do you own? Do you share ownership?
- Do you have detailed information about and access to all of your digital assets?
- Are any of the companies where your digital assets are held based overseas?
- Who currently has access to your digital assets? Who will or will not have access to your digital assets upon your death? Should certain assets be deleted upon death?
- Do you have an information vault (personally or through an advisor) where you can store digital asset access information?
It is critical to ensure you have a structured digital asset plan in place. This planning includes understanding of how your assets may be properly secured and how they could be effected across multiple tax scenarios.
Marcum’s Family Wealth Services team is available to discuss how your digital assets fit into your family portfolio and assist with establishing a revocable trust to protect them.