Our lives are increasingly digital, and our estates are no exception.
Cryptocurrencies, online investment accounts, digital wallets, cloud storage, social media profiles, domain names and even valuable digital artwork may all need to be considered when making or reviewing a Will.
Unlike many traditional assets, however, identifying a digital asset does not necessarily mean an executor will be able to access it. How those assets are recorded, accessed and dealt with can therefore become an important part of effective estate planning.
Why Do Digital Assets Require Special Estate Planning?
Digital assets can be difficult for executors to identify and access.
A cryptocurrency holding, for example, may be controlled through a private key, hardware, account credentials or other means. If those details are lost, the asset may prove difficult to access and distribute, even where a Will clearly identifies the intended beneficiary.
This makes planning for digital assets particularly important. Executors need sufficient information to identify what exists and understand how it can be accessed, without compromising the security of the assets during the owner’s lifetime.
What Are an Executor’s Responsibilities for Digital Assets?
Executors are responsible for identifying and administering the deceased’s property.
In England and Wales, this includes preparing an accurate inventory and account of the estate when lawfully required under section 25 of the Administration of Estates Act 1925.
Digital assets therefore need to form part of the wider estate administration process. Where an asset is overlooked or cannot be accessed, this may create practical difficulties, cause delays and potentially result in loss for beneficiaries.
Are Cryptocurrency and Digital Assets Subject to Inheritance Tax?
HMRC treats cryptocurrency and other digital assets with the same scrutiny and attention as stocks or bank accounts. It has also issued letters to agents reminding them of the need to include cryptoassets when preparing inheritance tax accounts.
HMRC provides guidance through its Cryptoassets Manual and continues to publish updates covering the Capital Gains Tax and Inheritance Tax implications of digital assets.
Digital assets should therefore be considered not only when preparing a Will, but also when establishing the value and composition of an estate.
How Should You Include Digital Assets in Your Estate Plan?
A sensible digital estate plan should consider several practical issues.
Create a digital asset inventory
Record the types of digital assets you hold, the relevant platforms or wallet locations and sufficient information to help your executors identify them.
Make secure access arrangements
Passwords, private keys and seed phrases should be kept securely. Sensitive access information should not be placed directly in a Will, as the Will may become a public document following probate.
Leave clear instructions
Consider how you would like particular assets to be dealt with. For example, you may wish for cryptocurrency to be transferred to a beneficiary or sold so that its value forms part of the wider estate.
Choose appropriate executors
Consider whether your chosen executors have sufficient technical knowledge to deal with your digital assets.
Review your arrangements regularly
Digital assets can change quickly, both in value and in the way they are accessed. Regularly reviewing your digital asset inventory and estate planning documents can help ensure that your arrangements remain appropriate.
Can All Digital Accounts Be Inherited?
Not necessarily.
It is important to distinguish between a digital asset that can be inherited and a service that is simply licensed to an individual user.
The terms governing email accounts, social media profiles, cloud storage and subscription services may affect what an executor is able to access, transfer or close.
Understanding what you actually own, and what you simply have a right to use, is therefore an important part of planning for your digital estate.
Why Digital Assets Should Be Part of Your Will and Estate Planning
Digital assets should not be treated as an afterthought.
Identifying what you own, planning securely for access and ensuring that your Will contains suitable administrative powers can make the difference between a smooth transfer and an asset being lost altogether, whether because access cannot be obtained or because unnecessary administrative costs make recovery impractical.
If you own cryptocurrency or other valuable digital assets, it is sensible to consider them as part of your next Will or estate planning review.
How Can Rose & Rose Help with Digital Estate Planning?
Our Wills and Probate team in Kingston upon Thames can help you consider digital assets as part of your wider Will and estate planning arrangements.
Whether you hold cryptocurrency, online investments or other valuable digital assets, careful planning can help ensure that your executors know what exists, understand your wishes and have the information necessary to administer your estate.
If your digital assets have changed since you last reviewed your Will, or you are unsure how they should be dealt with after your death, contact Rose & Rose Solicitors LLP to discuss your estate planning with our team.
This blog post is not intended to be taken as advice or acted upon. If you are seeking legal advice, please contact our team of solicitors.
Frequently Asked Questions
Yes. Cryptocurrency may form part of an estate and instructions can be given about whether it should be transferred to a beneficiary or sold as part of the estate administration.
Sensitive access information such as passwords, private keys and seed phrases should not be placed directly in a Will because the Will may become a public document following probate.
Yes. Executors are responsible for identifying and administering the deceased's property, so providing sufficient information to identify digital assets can be an important part of estate planning.
HMRC expects cryptoassets to be included when relevant to inheritance tax accounts and provides guidance on the Capital Gains Tax and Inheritance Tax implications of digital assets.
Depending on your circumstances, relevant assets may include cryptocurrency, digital wallets, online investment accounts, valuable digital artwork and domain names. Other digital services, including social media, email and cloud storage, may be governed by terms that affect what an executor can access, transfer or close.
