Since 2018, a growing number of clients have been including digital assets into their wills. Naturally, these assets are more common in the younger generation, however all clients should consider the implications of not including these details in their will.
32%* of people have included details of digital legacies in their will or would include them when they make a will. This digital way of thinking has increased since 2018, with 27% of people saying they would include details and 29% in 2019.
Practioners are advised to ask clients to consider what should happen to their social media accounts, online gaming accounts, as well as online banking and investment accounts. As we’ve seen in the national media, when things go wrong with digital assets they can have catastrophic repercussions.
One example being that Stefan Thomas had just two attempts left to correctly enter his password to unlock his hard drive that contained approximately £175m worth of Bitcoin. He was allowed 10 failed attempts to access the hard drive, when all of these attempts had lapsed his bitcoin will be inaccessible. Mr Thomas had written the password on a piece of paper and subsequently misplaced it. Having tried and failed to input the correct password eight times, he began to worry about losing a small fortune forever. More information on the story is available here.
Matt Parr, Legal Director at Shakespeare Martineau spoke to The Express at the beginning of the year about advising clients with regards to digital assets.
“People are advised to leave a breadcrumb trail for their Executors to follow.
“Digital currency, for example, is often stored in its virtual ‘wallet’ which can be on a USB storage device in a ‘cloud type’ service.
“Wallets are highly encrypted and access is password restricted. Executors are unlikely to be aware that you hold e-currency unless you tell them and when you die the virtual funds would still exist but be inaccessible and lost forever causing financial loss to your estate.”
Matt continued:
“You shouldn’t record such important access information in your Will as this becomes a public document upon application for the Grant of Probate and as such your security would be severely compromised.
“Ensure that your Executors are made aware while you are alive of a separate document which they should refer to. That document should be stored securely and only be accessible by a password holder chosen by you.The document can contain information as to the whereabouts of the Wallet in the cloud of indeed the USB storage device.
“Any type of online deposit for ordinary currency such as accounts with The National Lottery, betting websites and PayPal are all accessible by password and are likely to be overlooked by your Executors. You are able to gift your digital assets in your Will, in the same way you can gift cash assets to named individuals. Often it is digital assets which carry more sentimental value than monetary value that cause issues if there is a dispute as to ownership, such as photographs.
“It is important that your Executors are aware of any digital assets with a monetary value as the value of such assets should be incorporated into your estate for Inheritance Tax purposes. Your executors must account for this to HM Revenue & Customs and if necessary, obtain professional valuations for those assets.”
What are digital assets?
Digital assets include:
- Photographs
- Videos/Films
- Music files
- Social media accounts
- Crypto-currency (i.e. Bitcoin)
- Online bank accounts/savings
Digital assets aren’t something that people think about and consider, and although as Matt touched upon, many provide sentimental value, but there are those that have monetary value. The Co-Op warned of the perils of not leaving a breadcrumb for executors to follow with an unclaimed assets pot growing to an eye-watering £1.25bn.
HMRC have recently published their Cryptoassets manual to help practitioners navigate these waters.
When you’re taking client instructions do you mention digital assets and the repercussions of not documenting them properly?
Reference
*UK Wills and Probate Marke 2020: Consumer Research Report
