What Happens to Your Digital Assets When You Die?
Harm Dhillon
Too often, individuals invest time and money into emerging digital assets, but forget to plan around them when creating and updating their Wills. This not only complicates things for your beneficiaries, but also for the Executor of your estate.
A digital asset is any digital file that a person owns. They can hold sentimental or monetary value and can be stored among various devices.
Digital assets can be passed through your Will as per your testamentary wishes. These could include cryptocurrency, PayPal funds, digital music/videos/photos that you own, and so on. If these are not left to a specific beneficiary, they would become residual assets and be passed to a residual beneficiary. This is why it is essential to include them in your estate planning.
With personal digital property, you must give your Executor specific powers to ensure the associated devices (phone, tablet, etc.) can be accessed upon your passing. Companies such as Apple and Microsoft are dedicated to protecting each individual user’s information stored on the Cloud. Accordingly, such companies often require a Court Order from your Executor if they are attempting to access assets through the Cloud. Fortunately, a Grant of Probate often fulfills this requirement, but there can be challenges
Things become more complicated when dealing with digital assets that have financial value such as Bitcoin or non-fungible tokens (NFTs). If these assets are behind pass phrases, seed phrases, and passwords in a “hot wallet,” it is essential to keep track of these elements to ensure your “hot wallet” is accessible upon your death.
If you have a “cold wallet,” meaning that your assets are offline and in the form of a physical device,or a “hardware wallet,” meaning that your assets are on a customized physical device designed to keep your cryptocurrency offline, it is important to keep track of the physical device, whether it be a USB device, paper wallet, or any other cold storage. If you have a “hot wallet” where private keys are stored on software that are always connected to the internet, you must be diligent and keep your pass phrases and passcodes up-to-date and available, as noted above, as many open-source cryptocurrencies have no mechanism to recover this information if forgotten or misplaced.
Other assets, such as loyalty rewards and points, should not be overlooked. Companies often have extensive policies regarding transferring these assets and these rules should be reviewed thoroughly. Sometimes, there are simple procedures in place to distribute rewards to your loved ones but often, companies require a specific bequest in the Will and a death certificate.
So, what should you do?
- Make a list and check it twice – Create a detailed inventory, ensure you are updating it as you change passwords, move/store physical devices, and develop your digital assets.
- Leave specific instructions in your Will – Ensure that the Executor of your estate has the power to find and transfer your digital assets, and identify who is to receive your digital assets
At Vogel LLP, our estate lawyers can guide you through the challenges that come with disposing digital assets by helping you design a comprehensive plan that protects your testamentary wishes.