A digital asset can be defined as personal property owned by an individual that is stored in digital form.
In other words, the asset is an online or electronic image, multimedia or files. These kinds of assets have grown over the last 20 years and often they have monetary or sentimental value.
Sentimental and personal digital assets
Digital assets can include data stored on computers, external hard drives, flash drives, laptops, tablets, smartphones, digital music players, e-readers and digital cameras. Any information, image or data that is stored electronically, whether stored online, in the cloud, or on a physical device such as a computer is a digital asset.
Some digital assets may have sentimental value, such as e-mails, photos stored online, Facebook and other social media profiles.
Other digital assets may have financial value, such as PayPal, online gaming accounts, domain names, cryptocurrency, online businesses or other digital property which generates revenue.
Financial digital assets
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. Bitcoin is becoming increasingly popular as an asset as users do not need to identify themselves when sending it to another user, or when a transaction request is submitted.
While, at present, anonymity is guaranteed, this may change in the future if regulators begin to require identification.
Estate planning for cryptocurrencies can be challenging as Bitcoin is not held in an individual’s name and is difficult to transfer to others on death. Bitcoin can be stored in a number of ways that usually involves a unique code or a key which matches another code or key. However, if the unique code or key is lost then Bitcoin is lost forever.
As Bitcoin is not printed currency like a bank note, if the code or key is lost then it will be untraceable and cannot pass to beneficiaries.
How can digital assets be safeguarded?
Identity theft remains a risk, as with any online asset. However, most digital assets can be protected with the use of advanced security measures. It is important to download and then back up digital assets regularly, to mitigate the risk of losing them.
Holders of digital assets may choose to keep a record of the usernames and passwords (stored securely) so that the assets can be accessed post death. Of course, if a record of usernames and passwords are to be kept, then it is important that these are appropriately stored so that they cannot fall into the wrong hands.
Provision can be made in a Will for digital assets, and you may wish to leave direction in a letter of wishes to your Executors as to where to find and how to access the information needed to deal with these assets post death.
It is also important to make enquiries as to whether it is possible for your digital assets to pass on death and what arrangements need to be put in place for this to happen.
Next Steps...
Please feel free to contact me, Sara Hilliard, at s.hilliard@timms-law.com regarding this and any other issues concerning Wills, Probate and Lasting Powers of Attorney.
For more information on Wills & Probate, visit our webpage here.
