Digital Asset Solutions
What are Digital Assets?
Although it is quite possible to apply a wide definition to the term ‘digital asset’, for the purposes of estate planning we will define a digital asset as something that exists exclusively electronically, with either no physical corresponding proof of ownership at all, or very little.
So, a Bitcoin is a digital asset because it exists on a decentralised blockchain and there is no corresponding ledger entry with a bank or authority of any sort conforming who owns that Bitcoin – it is owned by whoever has use of it – by whosoever’s wallet it happens to be in at any given point in time. On the other hand, a balance in an online bank account is not a digital asset because although you can deal exclusively with your bank balance online, without ever going into a bank, in a catastrophe (e.g. the internet totally stops working) you could go into the bank with your ID documents and deal with your balance at the bank counter – i.e. your bank balance is owned by you as an identifiable person, unlike a bitcoin.
There are other examples of exclusively digital assets besides bitcoins and other cryptocurrencies. For example, an account on Instagram or Twitter with 600,000 followers could be classified as a digital asset, because it gives its user the ability to post to 600,000 people telling them about a new fashion item or music video release – the ability to reach so many people in this manner is of value.
Also, things like domain names (e.g. investments.com, music.com) can sell for thousands of dollars. Digital assets might even include movies and music tracks which you have paid for and have an entitlement to download and use.
Most, if not all online, or ‘digital assets”, accounts will be protected by a username, a password, and a linked email account for verification – some may also use a mobile phone number and others a list of security questions (e.g. what was the colour of your first car) - which without access to, the account is blocked. Additionally even the very existence of some online accounts that a person may hold will be known only to that person.
Why does it matter?
Many such assets may have a monetary value, such as the balance of a PayPal account, bitcoins and digital intellectual property (e.g. domain names). Accordingly, most people would want their beneficiaries to have access to those funds upon their death. Other accounts, such as iTunes and Amazon Kindle accounts may not have any value as such, but you may wish, where possible, for someone else to have the benefit of them.
For social media accounts (e.g. Facebook, Instagram, Twitter, et cetera) you may wish to decide in advance how those accounts should be dealt with. In many cases, such accounts hold a lot of personal information which it may not be wise to allow to remain online indefinitely after your death. Accordingly, you should decide who, should have access to them (and for what purpose) following your death.
If you do not leave clear instructions, it is possible that your Executors/family will know of your more obvious digital assets and therefore be able to take steps to wind them up, albeit without your instructions. However, this is not always the case. If you own bitcoins or gaming credits for example, due to their nature it is unlikely that your Executors will know how to find them unless you leave specific instructions. Domain names can also provide particular difficulties as, if you die shortly before your registry fees become due, the name could be allowed to lapse unintentionally through non‑payment of fees. It is therefore important that information is available to your executors so that they can deal with these issues promptly and effectively.
Your Digital Inventory
The first step in making provision for your digital assets is to clearly identify them and keep a record of them for the benefit of your executors. Excel or another spreadsheet is ideal for this as the document itself can be password protected albeit weakly. A better option might be “Keeper” or something else with 256-bit AES encryption or above.
Several providers now offer an online "safety deposit box" in which you can store your usernames and passwords. Those details could then be made available to a nominated person following your death.
An alternative is to keep a written list of accounts and access details in a safe place. This should not be included in a Will directly however, as, following a person’s death a Will may be seen by several people or even become a publicly readable document.
How, or whether, you can pass ownership of your digital assets to your chosen beneficiaries depends on the policy of the particular provider with whom your account is held. Unfortunately, there is no uniform set of rules. For example, in the case of iTunes and Kindle accounts, you are effectively leasing the content, not buying it. So you can leave your iPad or Kindle to your chosen beneficiaries under your Will but, in theory, you cannot leave them the contents of your accounts.
Succession to your Digital Assets
As part of your succession planning you should consider who you would like to benefit from your digital assets, and how you would like your online presence to be dealt with after your death.
You may wish to include a digital assets clause in your Will. This could take the form of allowing your executors the discretion to decide who should benefit from any digital assets with monetary or sentimental value, or you may wish to be more prescriptive and leave certain digital assets to named beneficiaries. You should also consider whether social media accounts should be shut down or ‘memorialised’.
You may also wish to appoint a separate ‘digital executor’ or at least ensure that one of your executors is digitally literate, so that any legacies can be given effect to and your other wishes carried out.
Alternatively, you may wish to take up one of the many solutions that Castle Estate Solutions can offer you, as we are particularly knowledgeable in this area and well used to dealing with all classes of digital assets, particularly cryptocurrency.
If you hold substantial value digitally, as more and more people frequently do these days, why not arrange a free no obligation discussion with us?