Digital assets pose a number of difficulties for English succession law, which has certainly not kept up with our ever-increasing online dependence. Matthew Barnett and Jessica Brittain from our Private Client team look the legal and tax consequences of having a digital estate, in the latest edition of Rathbones Review (the client magazine of the investment and wealth management firm).
Lockdown has increased the amount of time we spend using our phones and computers. As more of our music, photos and documents end up stored online and shared through social media platforms, there is growing unease about what happens to these digital assets when we die.
In 2019 a YouGov survey found that only 7% of people want their social media accounts to remain active after they die. However, it is estimated that by 2100 there could be 4.9 billion dead users on Facebook alone.
With the growth of online storage solutions, many items of sentimental value, such as family photographs, are now stored only ‘in the cloud’, potentially causing difficulties and stress for executors, family members and loved ones.
A 2017 Law Commission report entitled Making a Will identified no consistency of approach to the problem in the terms and conditions of service providers.
What are digital assets?
There is no formal definition of digital assets in English law. It can often be helpful to consider digital assets as falling into one of three categories:
- Financial value (online bank, shopping, betting, forex and investment trading accounts, PayPal and cryptocurrencies)
- Social value (social media accounts, like Facebook, Twitter and Instagram)
- Sentimental value (digital photos, iTunes library and YouTube account).
Generally, digital assets with financial value are legally owned by the individual and can pass in accordance with a will to the intended beneficiaries. Where these assets have a financial value, this must be calculated and included in any inheritance tax assessment on death.
In contrast, the situation for digital assets with social or sentimental value is less clear. Sentimental digital assets, such as personal photographs stored electronically on smartphones, tablets and computers, fall within your estate.
Read the full article at the Rathbones website