Both during and after the pandemic, we have become more reliant on technology in our daily lives. As the world becomes increasingly digitised, and the holding of digital assets normalised, we have seen an increase in the number of assets held electronically.
There is no set legal definition of “Digital Assets” which can take a variety of forms. These include music libraries, cryptocurrencies, such as bitcoin, online only bank accounts and investments, non-fungible tokens (NFTs), social media profiles, email accounts, and funds held in online accounts such as PayPal. These assets can be used as currency or for storing creative content, such as computerised artworks, videos, and photographs, on computers, laptops, tablets, and/or mobile phones.
Some of these assets may therefore have a substantial monetary value while others may have sentimental importance to you, your family, and your friends. Therefore, it is essential to consider your management of these assets to avoid them being lost and/or inaccessible in the future.
At present, there is limited legislation which governs how an individual’s digital assets are dealt with on their death or incapacity. Many companies which administer these assets are based in foreign countries and are governed by the laws of their jurisdiction. Indeed, many of them have their own terms and conditions which can vary significantly.
Here are some practical steps which you may wish to consider to avoid your digital assets becoming lost or inaccessible.
List your Digital Assets
Digital assets are typically protected by a username and password (whether this is by an online portal or simply a laptop login) and, owing to the nature of these assets, it may be extremely difficult for your appointed Attorney or Executor to access or even discover them.
In some cases, ownership of digital assets are held securely on a type of database or electronic ledger called “blockchain”. This enables the transfer of digital assets without the need to go through a bank, broker, or intermediary. The ledger usually has a public and private key which allows you to store and manage your assets. Your private key is what you use to prove your ownership and you need this passcode to manage your assets. If the key is lost, you will no longer be able to access or transfer the assets held.
Therefore, it is extremely important to collect and collate as much information as you can for your Attorney and/or Executor by making lists of your usernames and passwords and to consider how this information is stored and recorded. These lists should cover what is stored on your computer, phone, tablet, and/or laptop, and any accounts held online including any social media accounts.
It is especially important to list any online accounts, particularly if you have opened an online only bank, savings or investment account, which produces no paper-based statements. Online accounts can be very difficult to find, and it is highly likely that without this information your Attorney or Executor may not know about or be able to find these assets.
A beneficiary can inherit any digital assets that are fully owned by you and are transferrable, but you don’t necessarily own what you think you own. Some assets are not transferable and therefore cannot be inherited such as email accounts, social media handles or accounts, and subscription services such as Apple TV and Spotify. Therefore, your Executor or Attorney should consider the timing and effect of notifying these providers on your incapacity or passing. You should consider backing up your digital assets, for example, by storing your photos on an external hard drive or printing out hard copies of any important documents.
Due to the highly secure nature of these assets, it is important to store any information in a safe place and to make sure that your Attorney and/or Executor knows how to access them. You should also review this information regularly to keep it as up to date as possible.
Make a Will and a Power of Attorney
The simplest way to ensure that your digital assets are taken care of in the future is to include a provision in your Will and a power in your Power of Attorney.
In Scotland, you need to include a specific power in your Power of Attorney in order to give your Attorney authority to deal with a particular asset. As such, a power which gives your Attorneys access and authority to manage your digital assets, accounts, and subscriptions, is essential, if you wish for them to do so. If this power is not included, your Attorney may need to apply for this power through the courts which can be both expensive and time consuming.
The obvious advantage of having a Will is that you can specify exactly how you wish your estate (including digital assets) to be distributed by your nominated Executor. Your Executor should be someone who you trust to ingather and distribute your estate in line with the terms of your Will. If you hold digital assets, it is important to consider, when you are deciding who you wish to appoint, if they are computer literate to avoid any issues with the access and management of these assets. You should also consider giving them the ability to deal with these assets “as they deem appropriate” as this will give them flexibility when administering your estate.
You must also consider whether your Digital Assets are managed personally or by a third-party provider. If the digital assets are managed personally, it important that the Executor has the necessary information to access them as they will not have a third-party company to approach to obtain this information. If the assets are held by a third party, access can usually be passed to the Executor by including a provision in your Will, as this can serve to verify which assets are held and the identity of the Executor who has been given authority to access and manage these assets. However, it is always worth checking the terms and conditions of your management provider for what they would require.
Your Will becomes a public document once Confirmation has been granted so it would be unadvisable to specify any usernames, passwords, or cryptocurrency keys, in the details of your Will.
The digital nature of assets does not alter the fact that they form part of your estate and may have a monetary value for tax purposes. This must be disclosed to the Courts and HMRC and consideration should be given on how these assets are valued. Most companies require a copy of the Grant of Confirmation, which is the Scottish version of Probate, before they will allow the Executor to deal with the assets held. The jurisdiction of these assets should also be considered.
In Summary
Digital assets can be treated like any other property, and you should take steps to include reference to them in your Will and Power of Attorney. Unfortunately, it is all too common for individuals to fail to disclose information necessary to provide access, which can lead to the loss of personal, financial, and sentimental information and documents.
It should be noted that the legal and tax consequences of these assets may depend on the relevant jurisdiction. As such, forward thinking and planning are essential to ensure that there are no issues with obtaining access to these assets in the future.
