The Property (Digital Assets etc.) Bill: how would it affect estate planning?

The proposed Bill clarifies that certain digital assets can be recognised as personal property and therefore can attract property rights. Examples of digital assets include photos, videos, e-mail accounts, domain names, cloud accounts, online payment accounts, online gaming accounts, loyalty accounts; and crypto assets (such as crypto tokens, crypto currencies, non-fungible tokens and virtual carbon credits).

Currently, digital assets do not fall into the traditional two categories of personal property, i.e. things in possession (generally tangible assets) or things in action (personal property that can only be claimed or enforced through a court action, like a debt or contractual right). The Bill proposes that certain digital assets will be considered personal property in the law of England and Wales and thereby creates a third category of personal property.

As technology is moving fast and new digital assets are constantly being created and evolving, the Bill does not explicitly state which types of digital assets will be classified as such and therefore be treated as personal property under the law of England and Wales, but rather leaves it to the courts to respond to changing circumstances and decide through case law what constitutes a digital asset. This is to be welcomed and underlines the flexibility of the common law approach as opposed to the codification of law seen in civil law jurisdictions.

How will the new Bill impact estate planning?

Currently, if a person dies without making a Will, their digital assets will not fall within the statutory definition of personal property and pass under the Intestacy Rules. This means that by recognising a new category of personal property encompassing digital assets, the Bill will create clarity and mean that these assets can be protected by their owners and should be treated as all other personal property of their estate.

What can you do to protect your digital assets upon your death?

Personal representatives frequently face difficulty in accessing assets and ensuring their safe transmission to beneficiaries. Personal representatives may not have the requisite authority required, particularly in overseas jurisdictions, to access digital assets and therefore these assets may be deleted, locked or lost. Family members may find themselves locked out of their loved one’s devices and online accounts if they do not have the correct information, usernames or passwords.

How should individuals ensure their digital assets are protected and left as part of their estates?

The following simple steps will be key:

1. Review your digital assets. Conduct a full audit of all your digital assets and create a digital estate plan, to include online accounts, crypto assets, digital files, and digital subscriptions. Digital assets encompass not only assets that may be personal in nature such as social media accounts, online photos, family ancestry databases, selling platforms but also may be business-related such as business e-mails, selling platforms, and business bank accounts.
2. Ensure that all usernames, passwords and a record of such are stored in a safe place and that the record is updated as necessary. If it is possible to download as many of the key documents and information on a device such as a laptop, tablet or personal computer, this would be an additional backup rather than storing information solely online. Even better is to store a backup on an external hard drive.
3. Inform your executors or loved ones. If you have made a Will, tell your executors of the existence of your digital estate plan and where they can all be found. If you have not made a Will, make sure your loved ones know how to access documents, financial assets and accounts.
4. Check what will happen to your digital assets if you take no action. You can check the terms and conditions of your account providers for information on what will happen to your assets on your death or after long periods of inactivity.
5. Consider specific gifts. You can make specific gifts of items that your family and friends may wish to receive, such as photo collections, music, music compilations, or crypto assets, rather than leaving them to pass to your beneficiaries as part of your general personal possessions.

In the ever-changing world of technology and digital assets, it is increasingly important to ensure that your digital legacy is protected and passed onto your beneficiaries in a way that reflects your wishes and that is both secure and cost-efficient.

The best course of action would be to ensure that a Will is put in place that specifically deals with your digital assets and also ensures that your personal representatives have the requisite powers to deal with digital assets. For instance, if the governing law of an agreement that sets out the deceased’s contractual rights in relation to an online or digital asset service provider is not the law of England or the service may be received from a provider located outside England, such digital service providers have been reluctant to provide personal representatives with access to a deceased’s digital estate without an explicit authority to do so set out in the deceased’s Will.

The deceased may have indicated to the personal representative which digital assets should be retained and distributed (for example, digital photographs), and which can be eventually deleted (for example, personal correspondence). Before deleting any material, the personal representatives may wish to obtain an indemnity from the beneficiaries in case a complaint is made that the personal representatives have failed to maximise the estate. It is also good practice  to ensure that the Will contains a clause that gives the personal representatives power to deal with such digital assets even if they do not form part of the testator’s estate (i.e. even if they do not fall within the definition proposed by the Bill or the courts as comprising a digital asset and therefore personal property). Even if the personal representatives have been given such express powers and are aware of the deceased’s usernames and passwords, they or any agent they appoint should not attempt to access the deceased’s digital assets without ascertaining whether or not they are permitted to do so under the terms of the relevant service agreement. The service provider may need to give permission for the personal representatives to do so in order for the personal representatives not to breach the relevant service agreement and the computer misuse legislation.

If you have any questions or concerns about the Property (Digital Assets etc.) Bill or digital assets and estate planning, please contact Tracey Poole.