Enter password

Andrew Strange asks how you can make sure that your digital assets, such as photographs and cryptocurrency, won’t be lost when you die

Making sure that your executors have the passwords and codes they need is a key part of digital inheritance planning

There is around £25 billion1 in digital assets held online in the UK, but much of this wealth could be lost because it is often forgotten during inheritance planning. And with inheritance laws designed for physical possessions, the legal framework for protecting your digital assets after you die can seem flimsy at best.

You may have music accounts, ebooks and treasured photographs held online as well as assets such as cryptocurrency, but careful planning is needed if you want them to be included in your estate. Your Bitcoins, for example, will be useless unless you also leave the pass key – consider James Howells, from Newport, who unwittingly lost millions by throwing away an old computer containing his Bitcoin security information.2

Wealth Planning Director Michael Angus says it’s important that people not only create an inventory of all their online assets as part of their inheritance planning but also ensure that beneficiaries will be able to access key information such as passwords. “Identify everything you have and note it down because with all of these things, especially cryptocurrency, if people don’t know about them, then they are gone,” he says.

The growing popularity of cryptocurrency is making the issue of what happens to it after someone dies increasingly urgent. According to the Financial Conduct Authority (FCA), 2.3 million3 consumers now own electronic currencies, up from 1.9 million in 2020. The median value of individual holdings has also risen, to £300, although the FCA believes that overall understanding of cryptocurrencies among consumers has declined.

Sentimental value

But sentimental assets are just as important to many people, and the case of US marine Justin Ellsworth reveals just how difficult it can be for beneficiaries to access online assets. In 2004, when 20-year-old Ellsworth was killed in Iraq, his father sought access to his email account, which in effect amounted to a diary. Yahoo refused, claiming it was contrary to its terms of service, and Ellsworth’s father was forced to obtain a court order.4

More recently, Rachel Thompson, from Chiswick, was refused access to 4,500 family photographs and 900 videos belonging to her late husband. A court order was again needed before Apple would release the content.5

Many people may be under the misapprehension that they own their online content, whereas in reality they have nothing more than a licence to use a website’s service. This is governed by the website’s terms and conditions, which have to be accepted before use but are often so difficult to understand and long-winded that people don’t read them. The terms vary depending on the service provider, but the licence often ends on death and is non-transferrable.

Although privacy and confidentiality is often cited as the reason for this, it can be at odds with an individual’s wish to transfer their digital assets to the next generation. In the UK, there is no legislation to give executors the power to access and manage someone’s accounts and a grant of probate may not be sufficient for executors to gain legal title to digital assets. The government has, however, asked the Law Commission to make recommendations for changes to the law.6 Its review will consider whether digital assets should be made ‘possessable’.

“Very few people understand what happens to their digital assets or why it’s important to include them in their will”

Photos: Ben Stevens, Shutterstock

Worrying research

The issue is exacerbated because the majority of people have little understanding of what they need to do to pass on digital assets. Research published this year by the Law Society found that just over a quarter7 of those surveyed knew what would happen to such assets when they died.

The Law Society explained: “Technology is a huge part of modern life and our digital assets include everything from photos stored online to online bank and email accounts. Photos, social media accounts and emails from loved ones are just as treasured as physical possessions – and yet very few people understand what happens to their digital assets or why it is important to include them in their will.”

It added: “With many social media platforms only created in the last few decades, it is all too easy to overlook your digital assets when making a will. However, this can leave family members unable to access family photos saved on the deceased’s online accounts or close their loved one’s social media accounts. It can also leave them unable to access information they may need for probate which is stored on the deceased’s email or online banking accounts.”

Angus warns that it’s not just when someone dies that problems can arise. “Alongside your will you should consider Powers of Attorney as well,” he says. “That’s just in case, while you may not have died, you are unable to make decisions for yourself. By giving someone you trust Power of Attorney, they can get access to your bank accounts, cryptocurrency and other assets. We recommend every client has an up-to-date will and an up-to-date Power of Attorney.”

He adds: “Everything we do for clients starts with having a flexible plan and then projecting forwards. We always ask, ‘what’s the worst-case scenario?’ and often it’s that someone dies. We can’t advise someone to buy or sell cryptocurrency, but we can make sure it has been identified and is noted somewhere. When it comes to sorting out your estate, cryptocurrency must be considered for inheritance tax purposes, so along with all your other assets, your beneficiaries will need a note of all the values.”

You should also check the fine print of online accounts to see what happens to them on your death and then leave guidance for your executors, including whether you want particular accounts to be deleted, while also giving them specific authority to access and manage your digital assets.

James Howells lost millions when he lost his Bitcoin security details

Rachel Thompson obtained a court order to access her late husband’s photographs

Find out more

To learn more about inheritance planning, talk to your financial planner or visit www.sanlam.co.uk

This should be in writing and can be included within your will or made in a separate document that is signed and witnessed, which might carry the day if there is a subsequent dispute.

Passing on all your assets, whether digital or otherwise, can be a complex process. We can work with you to ensure that both your physical and digital assets are passed on successfully to the next generation. n

Sources

1 PwC survey, 2013 2 Motley Fool, 18 June 2021 3 Financial Conduct Authority 17 June 2021 4 NBC News, 21 April 2005 5 The Times, 1 May 2019 6 Law Commission, 4 September 2021 7 Law Society, 6 January 2021