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Asset Protection in a Digital World

18 June

Asset Protection in a Digital World

Figures show that the number of people in England & Wales who make a Will remains stubbornly at around 30% of the adult population.

This is in spite of a generally recognised understanding that to deal with your physical assets after your death, you need to make a Will. A majority of people are also aware that the same principle applies to any ‘intellectual property’ they may own, for example copyright or design rights etc. which also need to be dealt with. 

Nowadays, however there is a ‘new kid on the block’ in terms of digital asset ownership, of which understanding is less clear and, in many cases, not covered by the established rules governing intellectual property. People are often unaware of precisely what digital assets they have and how they need to deal with them in a Will, which in turn can give rise to issues when a person loses capacity and an attorney is acting on their behalf. 

Digital assets are possessions which an individual accesses on a digital device (laptop, mobile phone, tablet or personal computer). Further possible complications arise from these assets typically being accessed via online accounts with platforms such as Google, Facebook, Netflix, Amazon etc.

Digital assets include (amongst various others):

  • Digital photos
  • Digital music tracks
  • Digital videos
  • Emails
  • Social media accounts and their contents 

Pure Information

Whilst digital assets are transferred and shared electronically, the electronic signals are distinct from the information itself (the “e” and the “mail” are two different things in “email”). It is digital assets themselves which constitute pure information. From a legal point of view there are no property rights in the pure information (if you own a letter you own paper with markings on it you do not own the information that those marks represent). However, as with a physical letter, there are rights that are linked to the pure information which could be enforced for example, there may be copyright in a letter. So digital assets can be assets which in principle come under control of personal representatives (executor or administrator) after death or an attorney or deputy in the case of loss of capacity. 

Crypto Currency 

Crypto currency is a digital asset designed to work as a medium of exchange stored in a digital or computerised database which typically does not exist in physical form (like paper money).It is usually created by private individuals or groups rather than a recognised nation state which generally guarantees the value of real currency. Crypto currency is now acknowledged as a valuable commodity (property) and the Law Society recognises that digital assets have necessary indications of property. In other words, there is something about digital assets which so closely resemble real assets that they have an intrinsic value and the rights associated with ownership may apply to them. 

Account Terms & Conditions 

The fact that there are property rights under the control of the personal representatives only gets us so far. The Terms and Conditions of the internet service still play an important role. For example, the Terms and Conditions may mean that on death an account is simply deleted. In the case of Apple, it asserts ownership of the Apple ID against the account holder or their personal representative. Facebook has introduced a legacy facility, so a person can nominate someone who can then liaise with Facebook about saving account information after a person has died or lost capacity. Google has introduced an ‘inactive account manager’ to provide a similar function. 

US Privacy Laws

The majority of the most used online platforms, of course, are US based companies and therefore subject to strict US privacy laws. This prevents them allowing anyone other than the account holder having access to the account information. Following a number of cases the legal landscape in the US has changed with the introduction of the Revised Uniform Fiduciary Access to Digital Assets Act which gives limited rights to access digital assets to personal representatives and attorneys where the account holder has died or lost capacity. 

England & Wales 

Meanwhile, in England and Wales, personal representatives, attorneys and deputies need to be aware that an offence is committed if a person causes a computer to perform any function with the intent to secure access to any program or data where that access is unauthorised. The authority to provide such authorisation rests with the online service not the account holder (Section 1 - Computer Misuse Act 1990). If an account holder passes on details of passwords and login information for an account to a personal representative or an attorney, they would be committing an offence. In reality, 9 times out of 10 account information will be passed on in this way without the online platform’s knowledge, but strictly speaking, they should provide evidence of their authority to represent the account holder (Grant of Probate, Death Certificate, Power of Attorney) and gain proper permission.

Managing Account Information 

The first step is planning ahead. It would be sensible to create an inventory of online accounts, passwords and log in details which should be reviewed and updated regularly. These, however, should be kept safe and secure and not be disclosed to anyone as doing so may both undermine security and breach Terms and Conditions. It may be worth considering a commercial password manager although these also introduce potential security risk. Sometimes, old fashioned pen and paper is the best protection against digital hacking.

Storage 

One way round the problem of passing on specific digital assets to chosen beneficiaries (for example photographs) is to keep hard copies or a digital back up, either on a USB stick or a separate hard drive on an accessible computer, although this does of course contradict the normal reasoning for using online storage. 

Music

It is worth noting that an online music library (items) or music streaming service is only a license to listen to the music which ends when the account holder dies, so there is nothing that can be passed on or even used following death. 

Loyalty Cards

Loyalty cards need to be checked individually as some may have credits registered to them which will be simply lost on death, while others will allow points and credits to be passed on. The administrator of the scheme may have specific processes for responding to requests from a personal representative or an attorney. 

Smart Home Tools 

In the digital world, house heating and lighting systems may be controlled by apps and smart home technology, which in order for their function to be maintained, will require details of the accounts created to manage them to be available to the personal representatives. 

Personal Chattels 

The current definition of ‘personal chattels’ (Inheritance and Trustees Powers Act 2014) refers to tangible movable property, so if a person wanted to gift digital assets (perhaps using a letter of wishes alongside the Will, they would need to extend the definition in the Will to include intangible movable property. Not forgetting that the physical assets (smartphone, laptop or computer) may pass to someone else giving rise to various conflicts of interest. 

Managing digital assets can be something of a minefield, although with some thought and planning it should be relatively straight forward for most people to organise. What has become clear is that everyone should consider the rights and assets they have and be sure to include digital or virtual assets along with access to them and their storage when making a Will.

For further advice or assistance in making or reviewing a Will, please contact Charles Neal on 0114 249 5969 or email c.neal@bellbuxton.co.uk.