More and more of our clients are asking about digital assets in respect of their Wills. Is this because the meeting itself is taking place virtually or whether more people own and need to consider such possessions – possibly a mix of both.
So what are digital assets?
Digital assets can be anything stored in a binary format which comes with a right to use. Think email accounts, social media profiles, websites and domain names. Social media is an important category, as it is expected that by 2100 there will be 4.9 billion profiles for deceased users.
Digital assets can also extend to anything stored or owned virtually: photographs, literature, music, cryptocurrency and so on. Reward or loyalty cards or online gaming accounts also fall within this category.
So what do we need to think about when looking at digital assets alongside our estate planning?
- Are the assets of a financial or sentimental nature?
- Do you own or use the content?
- What do you want to happen to those assets or accounts when you die?
- Should the assets feature in your Will or overall estate plans?
- How can these assets be accessed or kept secure?
Are the assets of a financial or sentimental nature?
It is clear that assets such as cryptocurrency, online banking accounts, and certain works (photographs, music) will have a financial value. Your executors will be responsible for collecting in these assets and distributing them in accordance with your Will (or the intestacy rules if you do not have one!). These assets along with all your ‘tangible property’ (houses, possessions, cash and investments …) will also need to be declared in any inheritance tax calculations.
That isn’t to say that any assets of a sentimental nature should be ignored. Many people want to be able to transfer music and book collections on death, although this process can be exceptionally difficult. These assets may not have a monetary value but may still be something you intend on passing to your loved ones.
Do you own or use the content?
Accounts held with companies such as Spotify, iTunes, Amazon Kindle or similar, where storage is cloud-based are often held under a type of licence agreement. You have a licence to use that particular book or piece of music rather than owning it. Accounts are usually identified through regular payments and seen on bank statements which can alert people to their existence. If you only have a licence then it is likely that these will just cease on your death and it will not be possible to pass on to your loved ones.
If you own the assets or content personally, it is especially important to keep records of these, as they can easily get overlooked when an estate is being administered. However the process of your family getting access to them can be very complicated.
What do you want to happen to those assets?
With regards to licence agreements, in the event that subscription fees are not paid, or on death, these accounts can be closed by the provider and access to any content may be lost.
Depending on the companies’ specific terms, you may be able to grant access to a friend or family member so that they can transfer any items to another account on death. If items are personally owned and stored on the Cloud, it would be sensible to keep copies on an external hard-drive (as long as this does not breach the companies terms) which can immediately be accessed in the event of your death.
Should the assets feature in your Will or estate plan?
If you wish for specific digital assets to pass to specific people it is important that these are referred to within your Will. Otherwise there is a risk that these wishes will not be followed. Additionally, you may want to include a clause in your Will which refers to your digital assets generally, and gives your executors the discretion to decide who should benefit from any digital assets with monetary or sentimental value.
How can these assets be accessed and kept secure?
Depending on the asset or account, you might be able to add a third party user. Accounts such as Paypal will close the account and transfer balances on receipt of a death certificate or Grant of Probate like most other banks or online banking facilities.
Some people decide to keep a log or schedule of assets and the appropriate passwords or login details so that your executors are aware of them. There is a potential security risk with this as you are not meant to disclose this information to anyone or even write it down and you may be in breach of the companies’ terms. To try and minimise this risk you could put this in a sealed envelope and send it to your lawyers to be stored with your Will, only to be opened on your death by your executors. You would need to keep such a record updated regularly as it is likely passwords or reference details may change. Keep this secure and encrypted or password protected if stored virtually.
Do not include account details or numbers within the Will itself. Wills become public documents when admitted to Probate and this would be a security risk.
It is evident that with ongoing technological advances, this is an area which will continue to develop, reminding us to review our estate plans regularly (every 3-5 years) or at the very least when significant digital assets are acquired or following a sale. Not only will directions regarding digital assets be helpful on death, but they will also assist attorneys in the event that capacity is lost and they need to deal with your finances on your behalf. It is recommended that you seek legal advice from a lawyer over how best to deal with your digital assets when drafting up your Will as this is certainly a complex area of law that is regularly developing.