Digital assets are a growing area of interest for both investors and business owners. They include everything from cryptocurrencies and non-fungible tokens (NFTs) to monetized social media accounts.
These types of assets are gaining popularity because they offer a way to transfer ownership and use rights from one party to another without any third-party intermediary. However, they can also present complex legal issues. Digital assets are any files that are stored on a computer or server. They can include images, videos, audio, and Word and Excel documents. These assets are often assigned to companies that host their websites, domain names, and associated accounts. These companies typically require a legal claim of ownership from the owner’s next of kin and have policies to prevent unauthorized access or use. When a person dies, the assets that may be transferred to their family include email, video, and images, social media accounts, domain name and related accounts, backup information, games, and work completed on computers. A court must determine whether the digital asset is an investment contract based on the Howey test. This test considers whether the digital asset gives the holder rights to share in the enterprise’s income or profits or to realize a gain from capital appreciation of the digital asset. When someone dies, their assets may need to be transferred out of their control. This can be stressful for family members and may leave them with questions about what happens to the deceased person’s digital assets. Transfer-on-death (TOD) designations allow people to designate beneficiaries for brokerage accounts, stocks, bonds, and other assets. TOD designations can save estates and executors much time by ensuring that specific individuals receive the owner’s assets at death without having to go through probate. Brokerage firms are responsible for transferring securities registered in the deceased's name into a new account for the beneficiary or estate. Typically, buying, selling, or other account activity occurs once legal ownership is established and the new account is opened. The Uniform Transfer-on-Death Securities Registration Act allows owners to name beneficiaries for their stock, bond, and brokerage accounts. In some states, TOD designation can also transfer vehicles and real estate. There are several situations where a business owner would like to sell his or her ownership interest in the company. These may include a voluntary transfer of ownership to a third party, the death or retirement of an owner, or the introduction of a new owner. In all these situations, the best way to ensure that ownership will be transferred with prior consent is by creating provisions in an Operating Agreement that will govern the change of ownership.
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