What is a ‘digital asset’?
There is currently no legal definition of digital assets in the UK despite their prevalence in our everyday lives. So what is a ‘digital asset’?
According to Wikipedia, digital assets are, ‘anything that exists in a binary format and comes with the right to use it’. This could be digital information stored on your laptop, smartphone, tablet, gaming device etc. It includes social media accounts, books saved to your kindle, music stored on iTunes, photographs and videos in the Cloud, the list is endless. It is likely that most people reading this article will have at least one digital asset.
Should I gift my digital assets?
Most digital accounts such as Facebook, Instagram, Kindle, Apple, iCloud and iTunes are not actually ‘owned’ by the user instead you are entering a licensing agreement with that company when you set up your account. Therefore these are not assets you can give away under your Will.
Many digital assets have little or no monetary value, despite holding a great deal of sentimental value, such as family photographs.
However, certain digital assets such as cryptocurrencies often do have a monetary value. Cryptocurrencies (such as Bitcoin, Ripple, Ethos) should, therefore, be dealt with separately in your Will.
You might even like to appoint a separate digital manager in your Will if you do not want your Executor having access to certain digital material following your death. However, the digital manager would have no legal power, unlike your Executor.
Digital assets can be invisible to Executors
One of the biggest problems with digital assets is that they can become invisible after a person’s death.
Even if the assets are stored in a visible format, such as on a physical storage medium, it may be overlooked by an Executor. This may be because they do not actually see it (although it is there), or because the Executor has so many other tasks to manage that it does not occur to them to check the medium.
If there is no list or inventory for the Executor to follow, then they have the unenviable task of examining all the hardware devices, opening up web browsers, looking at the web history and so on, to try and ascertain any possible accounts and assets.
Digital assets can be impossible for Executors to access
If you have a portfolio of cryptocurrencies, for example, then unlike money in a bank account, your Executor cannot simply access the monies by contacting the bank and providing the appropriate paperwork. Instead to access cryptocurrencies the person entitled to deal with the monies can only do so if they have the appropriate electronic proof of ownership. The way cryptocurrencies operate is extremely complicated and outside the realms of this article, but essentially you need a wallet (often referred to as a digital wallet or e-wallet) and the password to the wallet.
On the face of it, this may not seem problematic however it raises serious concerns. The genuine owner may forget or lose their password and be unable to prove ownership. Secondly, someone may fraudulently attempt to represent the genuine owner to claim the cryptocurrency.
The high-profile case of millionaire crypto-trader Gerald Cotten shows just how you can lose control of digital assets in a devastating way.
Gerald Cotten died in mysterious circumstances leaving some US $149 million Bitcoin and other cryptocurrencies locked in wallets. The dead millionaire was apparently the only person that knew the encrypted passwords to the wallets. This left his Executors unable to access this vast sum of money. Incidentally the password was eventually broken, and the money was no longer there.
While the previous example is an extreme case, it illustrates the key challenges in managing digital assets.
The biggest practical steps you can take to help your Executors under your Will is to keep a memorandum of all digital assets and devices you own, together with login and password details kept separately in secure locations. You might consider storing this information in a sealed envelope with your Will, an external flash drive or in password management software.
One final point is that if you are an Executor of a Will with digital assets, you must always be mindful of the complex legal issues surrounding this area. These include infringement of copyright, intellectual property law, privacy, confidentiality and misuse of information as just a few examples.
Digital assets are a fast-growing and highly relevant area which the law is struggling to keep pace with. It is therefore important to speak to an expert who is up to date with these topical and potentially thorny issues.
Ask a lawyer if you would like your Will to deal with your digital assets as well.