Don’t discount digital assets in estate planning
For Canadians, starting the estate-planning conversation can be difficult as they face psychological and interpersonal hurdles. But once they overcome such obstacles, it’s important to leave no stone unturned — which means considering not just physical and monetary assets, but also digital ones.
“When we create an estate plan, we ask our clients to take an inventory of not only their real property, corporate interests, and cash in the bank, but also their digital assets,” wrote Sheila Morris, associate at Minden Gross LP’s Wills and Estates group, in a recent note.
As Morris explained, the term “digital assets” is a wide umbrella that encompasses items such as:
- Social media accounts;
- Digital photos;
- Electronic folders;
- Funds held in tech platforms such as iTunes and PayPal;
- Online subscriptions;
- Air miles and other rewards points; and
Canadians who want to have their social media accounts, which include dating apps, are deleted upon their death should leave explicit instructions in their estate planning. Similar endorsements should be made for photos that loved ones may want, as well as digital files — particularly those containing sensitive information or intellectual property — stored on devices and on the cloud.
“Loyalty and rewards points can be more complicated, and the requirements for transferring ‘points’ are usually found in the terms and conditions unique to each company,” Morris said. Some companies may permit loyalty points to be transferred to loved ones for free upon request, while others may have stricter requirements including documents such as the death certificate and a specific bequest in a legally valid will.
With regards to cryptocurrencies held as investments, she said that they are taxed in Canada like other investments. Gains on cryptocurrency are reported as capital gains, which are added to one’s income and taxed at their marginal tax rate. Those who bequeath crypto assets to their loved ones, therefore, should consider the tax implications and plan accordingly.
Social media accounts also deserve estate-planning protection, typically due to privacy concerns. But Morris stressed its relevance to social media influencers and content creators, particularly those with high engagement.
“For example, Lilly Singh is a Toronto Youtube sensation with 14.9 million subscribers,” she said, noting that her online presence has helped her land a late-night NBC television show. “Engagement at that level translates to valuable sponsorships and partnerships, and it is a prime example of a digital asset that should be protected with comprehensive estate planning.”