Digital assets and death

In the UK, an executor has a general duty to administer the deceased’s estate, which includes identifying and valuing all assets, settling debts, and distributing the remaining assets according to the will or the rules of intestacy if there is no will. This duty extends to digital assets as well.

We are in a new world where most of us will have some form of digital footprint and are likely to have one or more of the following digital assets, quasi-digital assets and digital pathways.

Digital assets include Cryptocurrencies, PayPal accounts, e-books, and Non-Fungible tokens.

Quasi-digital assets are digital assets in nature but also exist in a traditional binary world. i.e. our online bank account for a high street bank/building society. They will often have an alternative method that enable you to bypass the digital access pathway.

Digital pathways are avenues to access digital or quasi digital assets and include passwords and usernames, for hardware such as an iPhone, laptop, Kindle etc.

It is important for executors to consider if it is likely the deceased had an online presence and to what level, high digital footprint requires a greater attention to digital assets. If there were none or very little digital footprint this means less investigation, maybe needed.

Here are some key points regarding an executor’s obligations related to digital assets:

Identifying digital assets

• Due diligence: Executors are expected to make reasonable efforts to identify all assets, including digital ones. This involves checking for online accounts, digital wallets, and other digital assets that the deceased may have owned. This can be complex if emails addresses are not known and there are no records of usernames and passwords.
  • Checks will be needed of hardware on devices and USB/Thumb drives.
  • Bank statements should be reviewed to spot any pattern of online investments or payments for sale of digital assets into the accounts.

Documentation

• Executors should look for documentation that lists digital assets and access information, such as passwords and private keys.

Valuing digital assets

• Fair market value: Executors must determine the fair market value of digital assets at the time of death. For cryptocurrencies, this can be done using reputable exchanges to find the value on the date of death. For Non-Fungible Tokens they can be valued by specialist auctioneers.
• Professional assistance: In some cases, it may be necessary to seek professional assistance to value certain digital assets, such as domain names or websites.

Managing and distributing digital assets

• Access and security: Executors need to secure access to digital assets to prevent unauthorised access and potential loss.
• Distribution: Digital assets should be distributed according to the terms of the will or the rules of intestacy. This may involve transferring ownership of digital accounts, selling digital assets, or closing accounts.

Legal and tax considerations

• Inheritance tax: Digital assets are subject to inheritance tax, and their value must be reported to HMRC as part of the estate.
• Compliance: Executors must ensure compliance with relevant laws and regulations regarding the management and transfer of digital assets.

Practical steps for executors

• Create an inventory: Compile a comprehensive inventory of the deceased’s digital assets, including login credentials and access information if available.
• Risk assessments: Does the deceased have a digital footprint, is it possible they have digital assets, is further investigations needed.
• Consult professionals: Seek advice, our probate team at Crowe can guide you on how to deal with digital assets with the support of our forensics team find missing assets.
• Communicate with beneficiaries: Keep beneficiaries informed about the status of digital assets and any actions taken including the cost to secure them.

While the obligation to find digital assets is not explicitly stated in UK law yet, it will only be a matter of time before more estates include digital assets and claims for not taking enough care are bought through the courts.

Executors have a general duty to administer the entire estate, which includes digital assets. If the deceased has a strong online presence and it is clear from bank records that there had been purchases of digital assets then more extensive searches will need to be undertaken.

By taking reasonable steps to identify, value, and manage these assets, executors can fulfil their responsibilities and ensure that the deceased’s wishes are honoured.

If you have any questions or need further assistance please get in touch with Natalie Butt.