As digital assets become more prevalent, and our lives become increasingly entwined with digital technologies, the need for effective solutions becomes ever more critical.
Your clients may not be aware of how many of their assets – from photos, to email accounts, to cryptocurrency – are categorised as digital, or what happens to these assets when someone dies or becomes incapacitated.
Last year, STEP carried out research into estate practitioner views on, and experiences with, digital assets.
This was a joint research project in partnership with the Microsoft-funded Cloud Legal Project at Queen Mary University of London. The findings were published in a report – Digital Assets: A Call to Action.
The findings were striking. Nearly 60 per cent of respondents had clients who asked about digital assets. Yet almost half of respondents had not undertaken any specific preparations or put in place organisational policies to help clients with digital assets in their estates.
Our survey indicates that many practitioners are only beginning to engage with digital asset estate planning.
What advice do clients need about digital assets?
Our research found that clients seek digital asset advice about estate planning and administration, with social media and email accounts topping the list of most frequently asked about assets.
Of the 58 per cent of practitioners that had received queries about digital assets, almost half had been asked for general estate planning advice, and nearly a third had been asked about transferring digital assets after death.
Conversations about data protection and privacy were also common during estate planning.
Clients also asked for help with estate administration. Of the 58 per cent that had received queries about digital assets, more than a quarter had been asked about obtaining access to the digital assets of a deceased person during estate administration.
Client queries most commonly concerned social media or email accounts, as well as cloud storage services containing files such as documents and photos.
Clients also often asked about planning for cryptocurrencies. However, legislation is still uncertain in relation to the location and tax status of some financial digital assets, and your clients should seek specialist technical, legal and tax advice in order to plan appropriately.
Our survey indicates that clients frequently have trouble when trying to access the digital assets of a deceased or incapacitated person.
Nearly a quarter of respondents stated that their clients had faced such difficulties. We asked these respondents to describe the impact on clients, with 79 respondents providing qualitative feedback, with the most common theme being the distress and frustration experienced by clients.
How can practitioners help clients deal with digital assets?
It is important that practitioners are able to guide clients through this challenging process with the requisite support and advice.
The survey findings suggest that, to help clients deal with digital assets, practitioners should consider the following:
Passing on assets to the intended beneficiaries
When helping clients plan their digital assets, here are some useful tips to consider:
- Help your clients plan how to pass on their digital assets by creating an inventory. To assist, STEP has developed a template Digital Assets Inventory.
- For financial-related information, only list the names of the institutions and their contact details. Exclude all account numbers and any sensitive financial data from the inventory.
- Keep the inventory and related documents in a folder. Advise clients to keep the folder locked in a file cabinet or safety deposit box. Ensure the executors know where it is located.
- Have a flash drive or other storage device holding the same information as backup to the folder.
- Keep the digital assets inventory up-to-date and remind clients not to include passwords or privacy keys. Clients should leave separate instructions for the executors on how to access the digital accounts and wallets.
- Do not include any specific details of digital assets or cryptocurrencies in the will. If possible, include general instructions on how the client would like the executors to administer them.
- Advise clients to make a financial property and affairs lasting power of attorney providing explicit authority for the attorneys to deal with their digital assets.
- Include a jurisdiction-specific digital assets clause in each of the client’s will, power of attorney, and trust agreements.
Successful estate planning requires clients to communicate their wishes about digital assets to their loved ones, just as they would regarding any other part of their financial estate or sentimental belongings.
Use legacy tools to access the digital assets of a loved one
The best way to ensure that people have access to a loved one’s digital assets is to encourage your clients to put plans in place as part of their own estate planning.
Most internet service providers set out clear terms of use for setting up an account, and it is understandable that they may prioritise their users’ privacy over the needs of a bereaved loved one. However, our report sets out the distress that can be caused when such access is denied.
The best way to avoid causing loved ones distress is for clients to make use of the legacy tools that companies like Meta and Google already have in place. STEP’s #DigitalMemories campaign (https://memories.step.org/update-your-legacy-settings/) has details of these tools, which are free and do not take long to complete.
What should you take away from this?
The main takeaway from the survey is that advisers should be discussing their clients’ digital assets with them in the same way they would discuss and make plans for the rest of their estates.
The traditional estate planning rule would be to review plans every few years or upon a major life event such as a birth or death.
However, this is a fast-growing area, with new digital platforms being developed every day and laws currently being established in relation to digital assets to manage some of the issues arising. For this reason, it is important to ensure portfolios remain up to date and plans are reviewed frequently.
Further reading
Digital Asset Entanglement: Unraveling the Intersection of Estate Laws and Technology (LexisNexis Canada, 2022) by Sharon Hartung and Jennifer Zegel highlights the potential pitfalls and financial and emotional loss that can occur as a result of digital assets being undisclosed or legally inaccessible.
It provides valuable insight and guidance for practitioners navigating their way through the intricacies of estate planning for digital assets.
Emily Deane technical counsel and head of government affairs at STEP
