Last weekend, being the fun-loving gal that I am, I decided to add up the value of my digital assets. The total was $7,500. This includes some pretty small stuff like the balance on my Starbucks card and my credits at the iTunes store. Most of it is in loyalty programs (such as upgrade certificates or Loblaws points) or Aeroplan. Some of these assets can be redeemed for cash value and others only have value when applied against things like hotels or flights.
Nonetheless, they can be worth thousands or even tens of thousands of dollars.
When you stop and think about it, there are all sorts of possibilities. What about the people who play games online? Many of them have valuable credit balances (e.g. for upgrades to the next level in the game) and of course there are the people who gamble online for real money – this can be worth huge amounts. Then there are digital currencies like Bitcoin. These can be used to make everyday transactions – I recently heard about a guy who sold his Porsche for Bitcoins.
So what are the implications of owning digital assets, especially after you die?
As technology progresses, more information will be stored digitally so it will become relevant to document it from a tax and legal perspective.
For example, if you have to fill out a statement of net worth, you list the value of your main assets such as your home, car, and RRSPs. Then you subtract the value of your liabilities such as your mortgage and/or loans. The difference gives you your “net worth”. Banks use this information to make decisions such as whether to approve your home-equity loan or line of credit so they need to include everything that is material to your financial situation. In the not-so-distant future it is highly likely that digital assets will also need to be included in your net worth.
Similarly, the value of your estate must be accurate for tax reasons so you will need to make mention of your digital assets in your will. Not all suppliers offer a transfer privilege but where possible it makes sense to capture this embedded value for your heirs. For the sake of your loved ones, be sure to keep a list of your current accounts and passwords in a secure location.
Duncan Stewart, Director of Research for Deloitte Canada and co-author of Deloitte’s annual publication on technology predictions commented as follows:
“Over the last five years, the average Canadian’s digital assets are worth much more: maybe 10x. In the next five years, they may further double or even treble in value. Although tax departments have the power to tax these assets, so far as we know they have been ignoring them for now. But when wealthy people start putting tens of millions of dollars into digital assets like Bitcoin, we are predicting that tax departments, especially in jurisdictions with high death duties, are going to take a much harder line.”
Clearly, digital assets are real. So when you add them up, not only do they make you feel richer – you are richer!
This story originally appeared in 24 Hours.