Previously, I’ve written about estate planning for video games and virtual worlds, including the potential financial value that family members and fiduciaries should consider for inventory and estate tax return purposes. As I have mentioned before, Edward Castronova, associate professor of telecommunications at Indiana University, in a May 2009 interview with CNN, estimated that $1 billion per year is converted into virtual currencies, primarily for video games (link).
In some of these video games and virtual worlds, there are established markets for selling and exchanging video game characters and their virtual items and property. Some games even permit exchanges of virtual currency for real–world dollars. For example, in November 2010, a player of the Entropia Universe video game paid $635,000—that’s real–world U.S. dollars—to buy in–game virtual real estate (an Asteroid Space Resort). To the outside observer, this seems like a lot to spend on a video game! But, according to an article describing the sale, this virtual real estate generates significant in–game virtual currency that can be converted to real–world dollars. That article reports that the previous owner paid $100,000 for the same virtual real estate in 2005 and earned that investment back within the first eight months of owning it.
Some video games even allow donations of in–game virtual currency to real–world charities. Following the March 11, 2011, earthquake and tsunami that damaged Japan, EVE Online video game players donated $44,607.50 to the Red Cross during a two–week charity drive. According to an April 2, 2011, article, EVE Online players have donated about $155,000 to charities since 2004, including charity drives following the Haiti earthquake and the flooding in Pakistan. More information about this EVE Online charitable giving and converting video game virtual currency into real–world charitable donations is available in this April 3, 2011, PC Magazine article by David Murphy.
In the last few years, there have been discussions about implementing in–game virtual wills to dispose of in–game characters and their virtual property, items, and currency when the video game player dies (link; link). I am not aware of any video game company currently implementing in–game virtual wills, but presumably these could function like a transfer–on–beneficiary designation like a person can use with a retirement account or a life insurance policy.
With the potential local law issues and conflict–of–law issues for virtual wills, it is important for video game and virtual world players to plan ahead and incorporate their digital property into their real–world estate plan. Beyond just writing down the account name and password for the fiduciaries to access the account, the fiduciaries and family members need to know if there are monthly fees to keep the video game or virtual world account open (so the video game character and its virtual property and currency are not deleted), what the approximate real–world value may be, and either how to transfer it or where to sell it. A little time spent planning ahead can make the administration much more efficient when the video game or virtual world player becomes incapacitated or dies.