Digital asset inheritance: What happens to your digital estate after you die?
For the super rich, digital assets can be as valuable as art and property – but inheritance planning is far trickier
In an era where wealth is increasingly digitised, questions of inheritance have become far more complex. A sweeping property portfolio or dazzling fine art collection has clear pathways for succession. But what about the not-so-visible assets? The millions held in cryptocurrency wallets or the irreplaceable troves of family photographs locked away in the cloud? For high-net-worth individuals and families, digital asset inheritance now demands the same meticulous planning as traditional estates.
“Most people carefully plan for how their property and investments will be dealt with following their death,” says Elizabeth Melhuish Andrew, associate at Taylor Wessing. “It is common to not give the same attention to the complexities of digital succession.”
Wills and the language of digital assets
The scope of what actually qualifies as a digital asset is vast. It encompasses the sentimental, such as personal photographs and videos, as well as the valuable, such as cryptocurrency and NFTs. This breadth makes careful drafting in estate planning essential.
“Digital assets are intangible, so they will not automatically be included under the standard definition of ‘personal possessions’ in a will,” says Melhuish Andrew. “The definition should be specifically drafted to include property rights over digital assets.”
Financially significant digital assets require even more precision. “Gifts of assets with monetary or income-producing value, such as intellectual property, cryptocurrency or NFTs, should be dealt with by way of a specific provision,” advises George Porter, senior associate at Taylor Wessing. “Testators should also consider appointing professional executors to maximise their value.”
The fine print can make all the difference. “Unless a will says anything to the contrary, stored information and digital files on a physical device are generally classed as included in a gift of that device,” explains Porter. “That may not reflect the testator’s intent.”
Cloud accounts and digital gatekeepers
Gaining access to a deceased person’s online accounts is not straightforward. US privacy legislation makes internet service providers cautious – and executors often face roadblocks.
“There is an argument that executors have authority to deal with the testator’s assets after death by virtue of their office,” says Melhuish Andrew. “But this is by no means certain.”
For this reason, proactive measures can make a substantial difference. “Testators may be better advised to involve a third party who provides a ‘master password’,” suggests Melhuish Andrew. “The introduction of a third party may reassure internet service providers that privacy legislation is respected.”
That reassurance can save time and expense. “Some providers now offer Digital Legacy facilities, where an individual can designate someone to manage their accounts after death,” says Porter. “Compared to applying to court for login details, such initiatives are warmly welcomed.”
Even with such tools, preparation remains vital. “Executors will have more success if the individual has given specific instructions to the provider or has provided written instructions in their will or letter of wishes,” Porter advises. “But they still need to comply with the provider’s standard terms and conditions.”
The hurdles of cryptocurrency succession
Cryptocurrency brings unique complications to inheritance planning. Without access to the required keys, wealth can effectively vanish. “Ownership and the ability to transfer cryptocurrency requires access to a digital wallet that contains a pair of keys, one public and one private,” explains Melhuish Andrew. “Both are needed to enact a transfer.”
The consequences of poor planning can be devastating. “The CEO of cryptocurrency exchange QuadrigaCX died suddenly without passing on information about the keys to holdings worth millions,” recalls Melhuish Andrew. “Thousands of investors were permanently locked out. It is a sobering example of the importance of adequate planning.”
Executors need clear instructions to avoid similar pitfalls. “Testators should ensure that wallet information is stored safely during their lifetime and that their executors know how to gain access,” says Porter. “Failing to do so can create additional stress for families at an already difficult time.”
Managing digital wealth
As digital wealth has matured so, too, has its recognition in law. This opens up more traditional estate planning options, albeit with careful consideration. “It has now been confirmed that digital assets can be treated as property under the law of England and Wales,” explains Porter. “This means that traditional tools, such as trusts, are open to those with such assets.”
Trustees, however, face added complexity. “They need to understand the assets, terminology and management requirements,” Porter says. “They also need to ensure they actually have the power to invest in such assets and must undertake proper due diligence.”
The fiduciary responsibilities are weighty. “Trustees must consider diversification and tax consequences,” notes Melhuish Andrew. “They also need to obtain and consider proper advice when exercising their powers, which may mean seeking specialist input if they lack prior expertise.”
Building a secure digital legacy
The digital revolution has transformed wealth management – but it has also introduced new challenges for estate planning. “Comprehensive and thorough planning during your lifetime is essential,” says Melhuish Andrew. “That includes reviewing arrangements regularly to ensure they remain fit for purpose.”
The blending of traditional and modern strategies is key. “The solution requires combining established estate planning tools with sophisticated digital strategies,” concludes Porter. “Working with professionals who understand both the technical complexities and legal frameworks is the best way to secure your digital legacy.”
