Why it is important to keep digital assets in mind when making your will

With our lives increasingly moving online, digital assets are becoming an integral part of modern life and are making up a larger proportion of people’s estates than ever before. For example, the Financial Conduct Authority’s cryptoasset consumer research indicated that approximately 2.3 million people held cryptocurrency in January 2021 and this number is expected to increase significantly in the coming years. Therefore, considering digital assets as part of your estate planning and including provisions covering the distribution of digital assets when making a will is becoming more important.

What are digital assets?

Digital assets include photographs, websites, music, social media accounts, email accounts, PayPal, eBay and cryptocurrency.

There is a clear distinction between digital assets which have monetary value (such as the balance on your PayPal account or cryptocurrency) and those which are of sentimental value, such as photos which you may wish to pass on to a loved one.

What problems might arise with digital assets? 

Several problems arise as a result of failing to consider digital assets and making provision for them in a will.

The first is that the extent of your digital assets can be difficult to determine. If you fail to leave details of them for your executors, they may be overlooked or your executors may not know how to find them. It can also be difficult (or even impossible) to obtain access to some digital assets post death if specific arrangements are not made, for example it is not possible to access cryptocurrency without holding the private key.

Digital assets are not included as part of a gift of your personal possessions. The law defines ‘personal chattels’ as all tangible movable property owned by the testator (the person making the will). As digital assets are not tangible, they are not caught by this definition and need to be dealt with separately to other chattels, or the definition of personal chattels will need to be extended to include them.

If you do not specifically deal with digital assets in your will, they will likely fall into the residue of your estate. The residue is the remainder of a deceased person’s estate which is left after the payment of specific gifts, debts, funeral expenses and inheritance tax. Wills tend to leave the residue to a person, people or charity, and you may not intend that to include ownership of one or more of your digital assets.

Finally, a failure to consider digital assets of monetary value when drafting your will may result in unexpected inheritance tax being payable.

Digital assets that cannot pass by will 

For some digital assets, you may in fact have only a licence to use the platform rather than owning the account, or the music or films you’ve accessed during your life. This will depend on the platform’s terms and conditions. For example, iTunes libraries are a set of single user licences which expire on the licence holder’s death and cannot be left by will.

There is no uniform way that online providers deal with online accounts on death and there are varying rules on what happens post death depending on each provider. The problems this causes for executors and family members of the deceased has led to the introduction of the Digital Devices (Access for Next of Kin) Bill which has just had its second reading in the House of Commons. The purpose of the Bill is to grant an automatic right of access to the contents of digital platforms and accounts of a deceased or incapacitated person to their family members.

In the meantime, there are various tools now offered by providers, for example Facebook and Instagram allow the creation of a legacy contact to look after your account following death.  Google has an Inactive Account Manger tool, which allows you to express preferences for how your account (and the data stored in it) should be dealt with post death. My colleague Helen Maddison-White outlines this in more detail in this article.

When making a will 

Digital assets are separate from the digital devices (i.e. laptops, PCs, tablets and mobile phones) on which they are stored. Ownership of a device does not mean you own all the material stored on it. Additionally, it may be that you wish to leave the device to a different person than the person to whom you wish to leave the digital assets stored on it.

Digital devices can be passed by will in the same manner as any other physical object and will be caught by the personal chattels clause in a will, unless specifically excluded. The material stored on them will not be caught by the personal chattels clause. You should consider to whom you would want this material to pass (if indeed it is capable of passing) and put the required arrangements in place, either by instructing your solicitor to include specific reference to the material in your will, or using the various tools available with online providers.

You should think about which of your digital assets have monetary value and which have sentimental value, and how you would like both types dealt with. Give some thought to how your executors would gain access to these assets and create a hard copy list of all of these assets and their locations together with any specific instructions for your executors, such as how to access them. Give particular consideration to assets such as cryptocurrency which may be very valuable and inform your solicitor of these assets when making your will. This list should be stored securely, reviewed and updated regularly.

If any of your digital assets are valuable, you may wish to consider appointing at least one executor with specialist knowledge and expertise of that type of asset to ensure that it is dealt with correctly on your death. Alternatively, you could appoint a separate executor to specifically deal with your digital assets, leaving your main executors to deal with the rest of your estate.

If you have any questions about digital assets please get in touch at info@ts-p.co.uk.