Have you planned for the future of your digital assets?
If you are writing or updating your Will, or planning your estate, it is increasingly important to consider what will happen to your digital assets when you die. It is likely that you will have a number of digital assets to consider, with the latest statistics published by the Office of National Statistics showing that 89% of adults in the UK have recently used the internet.
What is a Digital Asset?
In the UK there is no legal definition of a digital asset, but examples include media stored online (such as photographs, videos or music), online accounts (such as Paypal and Amazon), loyalty and frequent flyer accounts, websites, blogs and social media accounts.
A digital asset which receives frequent news coverage is cryptocurrencies, such as Bitcoin and Ripple. Cryptocurrencies are decentralised digital currencies which (where accepted) can be used to buy goods or services.
Certain digital assets (such as music purchased through iTunes) are subject to individual licensing agreements which terminate on death. This means you would not have the legal right to pass such accounts on to others in your Will. Many terms and conditions do not provide for what will happen if the account holder dies, so it may be necessary to check with the individual service provider what will happen to your accounts on death.
In line with Law Society guidance, we recommend keeping a record of your digital assets (such as laptops, mobile telephones and online accounts) during your lifetime. A list of passwords may also be useful, but it is important to consider whether this could be in breach of some terms of service. Having a record of your digital assets will help your executors identify and access them after you die. These documents should be updated regularly to ensure that your executors will have accurate information. We all know how important it is to keep this information secure, so we recommend you give this list to your solicitor in a sealed envelope, which we can then hold securely with your Will, on your behalf.
If and when those named executors do have access to account names and passwords, it is important that they exercise caution before accessing them after a death. Accessing someone’s account without appropriate authority can constitute an offence under the Computer Misuse Act 1990. They may wish to contact the service provider to clarify what authority is required to access the account.
It is occasionally possible to memorialise your social media accounts after your death (Facebook and Instagram are two social media platforms which offer this option). This will allow your social media accounts to remain open after your death which, depending on your privacy settings, can allow friends and family to gather and share memories. Certain platforms also allow you to appoint a Legacy Contact who can manage your social media accounts and download your data (such as your photographs) after you pass away.
If you hold an extensive portfolio of digital assets you may also wish to consider appointing a Digital Executor in your Will. This will allow you to appoint someone specifically to recover, preserve and transfer your digital records.
Inheritance tax on digital assets
When digital assets hold a financial value, they will be subject to inheritance tax in the same way that traditional assets are taxed. They must be declared to HMRC and any tax paid on them or there is a risk of interest and penalties against the executors. It is important to identify, access and value these assets as quickly as possible.
Law Commission Consultation
The government has requested the help of The Law Commission to provide recommendations for reform to ensure that the law is capable of allowing technologies such as cryptoassets and other digital assets to flourish. The research and work conducted by The Law Commission will consider whether digital assets should be deemed “possessable”.
Law in both England and Wales is flexible enough to accommodate digital assets, however there are still particular aspects of the law that are in need of reform to fully ensure that digital assets are given consistent recognition and protection.
The reform of the law will not only provide legal certainty but would lay a strong foundation for the development and adoption of digital assets. It may also incentivise the usage of English and Welsh law in transactions concerning digital assets.
The Law Commission call for evidence on digital assets closes on 30 July 2021 – more updates will follow.
The government’s move to add the protection of digital assets into law further demonstrates the importance of securing and preserving your digital portfolio.
If you would like any further information or advice about protecting your digital assets, please contact our specialist team on 0117 906 9400 or email email@example.com