The ever-evolving digital landscape has changed the concept of what an asset is, beyond that of mere physical possessions to now including numerous virtual and digital properties. From cryptocurrencies to Non-Fungible Tokens (NFTs), digital assets are now a fundamental part of our everyday lives.
However, unique challenges present themselves upon the passing of an individual in how these assets are dealt with. Critical legal questions must be addressed during the administration of a deceased estate which hold digital assets.
As part of our technology series, this article explores the particulars of managing and distributing digital assets in a deceased estate, with a particular focus on cryptocurrencies and other digital holdings. To learn more about the interface of technology and estate planning, please click here.
Digital Assets
Estate planning for digital assets and cryptocurrencies can be complicated because they often exist solely in digital form and are not physically tangible like traditional assets. Such assets can range from videos, digital books, digital bonds, online only bank accounts, cryptocurrencies, digital wallets, online trading accounts, social media profiles and cloud (online) storage. Such assets are normally protected by intricate encryption which makes them challenging and potentially impossible to access by any one other than the account holder and therefore challenging to deal with upon that holder’s passing.
Tips to deal with Digital Assets in a Deceased Estate
1. Identify and Catalogue the Digital Assets
The initial step is to is to identify and catalogue the digital assets of the deceased estate, in order to compile a comprehensive list of the digital assets held by the estate. This process could involve collecting information such as account details, encryption keys, and other documentation related to the assets.
2. Address the Privacy and Security Concerns
Digital assets are often accompanied by privacy and security measures which are in place to protect those digital assets as well as the privacy of the individual’s information during their lifetime. Privacy laws, terms of service agreements, and password protection must all be navigated in order to gain access to the digital assets of the deceased.
3. Consider The Legal Implications of Cryptocurrencies
Dealing with cryptocurrencies in a deceased estate requires a thorough understanding of the legal and technical aspects involved. This includes dealing with any exchanges which hold the cryptocurrency, managing private keys, accessing digital wallets, and complying with any relevant laws, especially if the cryptocurrency is taken to be held overseas as various countries differ in their treatment of cryptocurrencies.
4. Create a Digital Estate Plan
To try and avoid some of the issues considered above, individuals should consider creating a digital estate plan that accompanies their Will. Such a digital estate plan would outline an individual’s wishes regarding the distribution and management of their digital assets upon their passing. By being proactive and addressing such matters before death, individuals can ensure a seamless administration of their digital estate and reduce the burden on their loved ones in dealing with such assets. However, care needs to be taken as to balancing the risks of recording any passwords, to facilitate such administration.
Conclusion
As digital assets become more and more prevalent in our everyday lives, there is an increasing need to ensure that one understands the legal implications of managing digital assets in a deceased estate. The complexity of managing and distributing digital assets, particularly in dealing with cryptocurrencies and online accounts, requires expert legal assistance.
By planning ahead and ensuring that one receives legal advice from the beginning on how to ensure that any digital assets they hold are taken care of upon their demise, individuals can safeguard against any such assets being lost into the digital ether.
How can we help?
For more guidance on how best to navigate the world of deceased estates and digital assets please contact Ilana Kacev or Gareth Kerr. If you would like to keep in touch with Alerts and Insights from our Wills and Estates team, you can subscribe to our mailing list here.
Disclaimer
The information contained in this Alert is intended as general commentary only and should not be regarded as legal advice. Should you require specific advice on the topics discussed, please contact the firm directly.