Estate planning is not a particularly fun aspect of overall tax preparation, but it's important for individuals who want to pass on assets to their loved ones and minimize the amount of estate taxes that may be levied against their accounts, real estate and physical property. While most people incorporate tangible assets into their planning activities, some all too often fail to include their digital holdings into their plan, which can lead to complications for beneficiaries at an already critical period.
The Huffington Post recently reported that the average American may have roughly $55,000 worth of digital assets. The term "digital assets" can refer to a myriad of online holdings. This may include blogs, email and social media accounts, photos and music, software licenses, financial accounts, digital currency such as Bitcoins, domain registrations and file-sharing networks. In addition, these accounts may be accessed via several different portals, including desktops, laptops, tablets, smartphones and storage files. While these holdings may seem insignificant in the grand scheme of things, some digital assets hold either sentimental or physical value.
Do digital assets carry physical value?
â€‹In many instances, individuals may give little thought to what happens to their Facebook or Twitter account, because neither carry financial or tax implications. However, some digital holdings may hold value that can either affect their taxes or carry financial value that they want passed on to a beneficiary. For example, the Internal Revenue Service is taking a closer look at the greater use of Bitcoins as a rising digital currency, and are making determinations as to whether and in what circumstances they may be taxable. Many states as well are also evaluating their options when it comes to collecting taxes for purchases made with the popular digital currency. While this may not be a concern to taxpayers currently, this digital asset has the potential to carry tax implications in the future.
In other instances, individuals may forget about the thousands of dollars sitting in their PayPal account, Amazon gift cards or eBay credits. While many of these funds won't trigger a tax, it's still a form of financial asset that people may want to pass on to loved ones. The same is true of blogs, YouTube channels and other online media that may bring in income via advertisements and sponsors. As many people now rely upon popular blogging to make extra income, ensuring that at least one person is designated to close these accounts or continue maintaining them is critical.
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