What is a Digital Asset?
A digital asset can be defined as personal property owned by an individual that is stored in digital form. In other words, it is online or electronic, and the format can be images, multimedia or textual content files. These kinds of assets have grown over the last 20 years.
Sentimental and personal digital assets
Digital assets are often in the form of computers, external hard drives or flash drives, laptops, tablets, smartphones, digital music players, e-readers, digital cameras, and similar devices. Any information or data that is stored electronically, whether stored online, in the cloud, or on a physical device such as a computer, is digital.
Personal digital assets may have sentimental value, such as e-mails, and photos stored online within emails or Facebook or other social media profiles. Other digital assets may have financial value, such as PayPal, online gaming accounts, domain names, online businesses or other digital property which generates revenue.
Financial digital assets
A cryptocurrency is a digital or virtual currency that uses cryptography for security, making it difficult to counterfeit. Bitcoin was the first dispersed cryptocurrency in 2008. These are becoming more popular. Bitcoin is attractive as an asset since users do not need to identify themselves when sending it to another user, or when a transaction request is submitted. The protocol checks all previous transactions to confirm that the sender has the requisite number of Bitcoin, as well as the authority to send it. While, at present, anonymity is guaranteed, this may change in the future if regulators begin to require identification. However, estate planning for cryptocurrencies can be challenging, largely due to this lack of transparency. In addition, as Bitcoin is not held in an individual’s name, it is difficult to transfer to others on death. It can be stored in a number of ways that usually involve a unique code, or private key which matches another code or key. However, if the unique code is lost, the Bitcoin is lost forever. As Bitcoin is not printed, like bank notes, if it is lost it is similar to losing cash because it is untraceable without the code, so beneficiaries will be unable to access the Bitcoin.
How can digital assets be safeguarded?
There is the risk of identity theft with any online asset; however, most digital assets can be protected by advanced security measures. It is important to download and then back up digital assets regularly, to mitigate the risk of losing them. Our advice would be to collect and collate as much information on them as possible, including user names. Correlating passwords should also be stored discreetly and consideration should be given as to how this information will be stored or recorded, and whether it could be in breach of some terms of service.
When preparing a Will, it may be prudent to prepare a letter of wishes to go with it, advising your executors and trustees how you would like your digital assets to be dealt with on your death. It is always sensible to prepare a record to go with your will, listing your digital assets, including online accounts, devices and important information that is stored on them. A list of passwords will be extremely useful but it must be kept up to date. This information is best left in a separate note, as you do not want these included in your will, which may become a public document if probate is required.
Legal documents, such as powers of attorney, could be revised to allow attorneys acting on your behalf to access your computers, storage devices, accounts and data. This authority will prove useful for heirs trying simply to gain access to digital family photos or your Facebook account, let alone your Bitcoin.
For further information regarding the above or if you would like to discuss a Wills & Probate related query with one of the team, please call us on 0800 011 6666 or e-mail the team at legal@timms-law.com.