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How to protect your digital assets after death

How to protect your digital assets after death

What happens to your digital assets after your death, and what steps should you take to safeguard against misdirection of assets, or loss of sentimentally or financially valuable materials?

The first thing to consider is: are your digital assets actually assets?

The problem with any discussion of 'digital assets' is that often one is not referring to 'assets' in the strictest sense of the word, but rather to 'information'.

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Assets and information are treated very differently on death, and it is important to bear this distinction in mind when considering your estate planning.

Why are traditional assets easier to manage?

When you die, your personal representatives are entitled to deal with your assets under long-established legal principles.  

They prove their entitlement by obtaining a grant of representation, which can be provided to the custodian (for example, a bank) of the relevant asset. The custodian will then transfer the assets to your PRs who distribute them in accordance with your will.

Information held by those custodians tends to be readily provided along with the assets; banks, for example, are usually willing to provide historic statements that will enable the PRs to determine the extent of the estate and to file the last self-assessment tax return.

We have never encountered a situation in which such information has been refused by a bank or asset manager.

However, that is in contrast to 'pure' information. For example, the General Medical Council will not freely disclose a deceased patient’s files to his PRs on the grounds that the "duty of confidentiality persists after a patient has died".

They will provide disclosure only in a limited number of circumstances, which include “when disclosure is required by law”. If there is a legitimate reason for the disclosure – for example, because the PRs are bringing a medical negligence claim – the law has mechanisms for rendering the information available.

Why is cryptocurrency not dealt with in the same way?

The traditional approach to assets evolves from 20th century law, before the conception of the internet and certainly before the cryptocurrency boom.

Cryptocurrencies blur the distinction between information and assets, because the asset can only be accessed through the information of the pass key. The risks of losing a pass key are poignantly illustrated by the example of James Howells who, by throwing away an old computer, unwittingly lost millions.

Leaving cryptocurrency to a beneficiary in your will is a helpful indication of your wishes, but there is no custodian the PRs can wave a grant to in order to access the underlying assets.

If you have bitcoin, your PRs will only be able to access it with a pass key. It is therefore vital that the pass key is made available to them, either in a sealed letter to be opened on your death, or during your lifetime.

Sentimental assets

In 2004, 20-year-old marine Justin Ellsworth was killed in combat. His father sought access to his email account, which in effect amounted to a diary.