The Succession of Digital Assets
Questions around the succession of digital assets are increasingly significant in this digital age. This article is a brief introduction to the topic and highlights some points of relevance.
What are digital assets?
There is no definition of a "digital asset" under UK legislation.
Digital assets can broadly be described as possessions that exist in a digital form.
There are a number of examples of digital assets including:
- online bank accounts;
- other online accounts such as digital media accounts, data storage accounts, social media accounts and gaming accounts;
- virtual currencies such as Bitcoin or Ethereum; and
Ownership and succession arrangements
Digital assets may have significant monetary value. Cryptocurrency holdings can sometimes be a good example of this. In addition to monetary value, some digital assets may have sentimental value, such as digital photographs.
The subject of ownership and succession of digital assets is not without detail. Unlike tangible personal property which can be physically transferred (such as computer hardware), digital assets might often be described as intangible in that they cannot be claimed by taking physical possession (digital photos and domain names being examples) and they may also comprise contractual rights.
Ownership and succession arrangements depend on the particular type of digital asset. Many digital assets form part of an individual's intellectual property and fall within the scope of copyright law but this is by no means always the case. It can be helpful to consider some examples.
- In practice, online bank accounts are often dealt with in much the same way as non-online bank accounts for succession purposes. Typically banks will have teams well placed to talk executors through the succession of a bank account.
- Some digital media accounts only grant the account holder a licence to use files rather than ownership, on the basis that ownership stays with the services provider. This can mean that the licence to listen or use the files terminates on death and is non-transferable. Terms and conditions of the services provider are relevant.
- The right to access data storage accounts is also subject to the specific terms of the relevant provider. Sometimes the services provider deletes the account when the holder dies and the data that was stored might then be lost. With a view to avoiding this, some services providers enable account holders to nominate an individual to access the account on death. If the account holder nominates their executor (for instance) in this way, the executor might then be able to access the account at the time of death and download its contents or transfer the contents to another account. Of course, some account holders might also backup data storage accounts on an external hard drive.
- Social media accounts may enable specific arrangements with a view to ensuring that the account can be dealt with on death. Facebook, for example, enables an appointment of a "legacy contact" to choose to have an account permanently deleted on death or to control the account if it is "memorialised".
- In a recent case, it was concluded that cryptocurrencies are a form of property. Bitcoins, for example, can be transferred but passwords are needed.
There are various difficulties that can arise when dealing with the succession of digital assets, including the points below.
- Executors can only access digital assets if they can first identify them.
- Many digital assets laws have evolved around an intention to protect the intellectual property rights of services providers and to protect confidentiality. This can present complications when executors want to access information. There are numerous examples of online services providers refusing to grant executors access to online accounts.
- Even if executors have express power to deal with a digital asset and are aware of passwords and related access information, they are at risk of committing a criminal offence under section 1 of the Computer Misuse Act 1990 if they access an online account without authority.
These difficulties help to inform practical steps to take to try to protect an individual's digital assets and assist with the succession of those assets to the extent possible. Some suggested steps are set out below.
- Make a list of digital assets and access information, ensuring of course that any list is kept secure and up to date at all times. There are a number of online providers offering a service which keeps a record of digital assets in a single place but clearly, if a service like this is of interest, great care should be taken to ensure that the provider is one in which the individual can be confident.
- In addition to personal digital assets, consider also identifying business digital assets. Business owners might hold a number of digital assets which may also need to be dealt with depending on the size and nature of the business and the business succession plans.
- Consider putting in place express lifetime authorisations with a view to enabling trusted individuals to access digital assets.
- Ensure that adequate will and lasting power of attorney arrangements are in place.
Steps for executors
- Check the terms of any will and related letter of wishes.
- Prepare an inventory of digital assets. To do this, executors might:
- collect in computing hardware including smart phone devices and check their content;
- check bank statements for subscriptions and continue to pay these where appropriate;
- check for any virtual currency wallets and passwords;
- gather any statements for online accounts and consider making further enquiries of the relevant providers to check for other assets;
- make enquiries of reward programmes; and
- speak with family members if appropriate.
- Check for any authorisations and seek advice if in doubt about authority to access digital assets.
- Consider the need to value digital assets for tax and other purposes.
The digital world has developed relatively quickly over time and there is no doubt that many, if not most, people in the UK hold digital assets which are of significance to them, whether of financial or sentimental value. Many people might not consciously distinguish between their digital assets and their other assets but, if prompted, they may well want to take steps to protect their digital estate and look to ensure that appropriate arrangements are in place for succession purposes. The steps in this article are useful to consider as a starting point but they are in no way exhaustive and this is certainly an area in which a trusted adviser, with knowledge of specific circumstances, can add considerable value.
This article is for information purposes only and is not a substitute for legal advice and should not be relied upon as such. Please contact Andrew White to discuss any issues you are facing.