Digital Assets and Memories - how to deal with them on your death

It is safe to assume that nowadays most of us have a “digital life”. Digital life, which inevitably one day will become a “digital estate”. Although the concept of digital assets of sentimental value is not new, the concept of monetary valuable digital assets is. We are now at the point where our online lives need to be considered when declaring our wishes in wills or when separating.

Many questions remain regarding estate planning and trust administration when cryptoassets are involved. It is important therefore that your legal advisor has at least some basic knowledge of the crypto and NFT market, so they are equipped to provide you with advice in relation to a separation from your spouse or partner, estate planning and eventually, estate administration.

When it comes to digital memories, (things like your iCloud storage, Instagram, Facebook and Google accounts) there are simple steps you can take to ensure that access passes to someone you trust on your death. A number of service providers have already enabled a “legacy service”. That service allows you to nominate someone who will have control of your account after your death. Although, some providers (for example, Instagram) don’t have that service just yet, it is likely that they will in the future. For those social accounts that don’t provide the function yet, consider letting your executor know what those accounts are and where the passwords for them can be located. A simple step like nominating someone for those social accounts which already allow you to do so goes a long way and can prevent unnecessary litigation and the need for court orders in the future. Given the majority of these providers are based outside of New Zealand, navigating the legal requirements to obtain access can be difficult and costly.  The last thing you would want is for your family to not have access to precious memories.

Cryptocurrency and NFTs (non-fungible tokens), on the other hand, might not be as easy to deal with, which is concerning, given the value that these assets can hold. The majority of holders of cryptocurrency and NFTs may not realise that certain considerations need to be given to these assets in their wills and wider estate planning to ensure that these assets can be dealt with in accordance with their expectations and wishes. 

What can you do to ensure your valuable digital assets pass to your family on your death as intended? 

• You should let your lawyer know that you hold valuable digital assets and what those assets are, so that they can make relevant provisions for those assets in your will.
• You should make an inventory list of your digital assets and review it as necessary (perhaps, every time a valuable asset is acquired or disposed of). It may be appropriate for your solicitor to keep a copy of the inventory together with the original will.
• You need to ensure the safe-keeping of the digital wallet, username/private keys and passwords and discuss with your lawyer whether it may be appropriate for records of those to be kept with the original will.
• Although none of us plan to die, it is a good idea to obtain tax advice in respect of your valuable digital assets sooner rather than later, including advice in respect of tax involved when the asset passes to a beneficiary under the estate. If you intend the beneficiary to keep the digital asset, you may need to consider whether tax will be payable and whether a beneficiary can afford it. NFTs are also capable of generating income and tax advice should be sought in that regard as well.
• There may be circumstances where it may be appropriate to not gift the asset outright to a beneficiary but perhaps for your executors to hold the asset for a certain period (for example a gift to a beneficiary who is a minor). If that is the case, you may want to leave some specific instructions to your executors on how to deal with the asset. One such instruction may be a specific direction not to panic and dispose of the asset if it plummets in value as this can be normal course for the crypto market.
• You may want to consider whether a life interest is more appropriate than an outright gift. For example, you want your spouse to use the income generated for his/her life and for the asset itself to pass to your children upon your spouse’s death. Such decisions may be dependent upon tax advice but also upon the will-maker’s personal circumstances. 
• At present, courts around the globe are faced with the question of intellectual property rights in NFTs. The US case of trademark infringement brought by Hermes against Rothchild for trademark infringement over its luxury handbag (Rothchild created MetaBirkins’ NFTs) will serve as one of the first instances that explore how intellectual property law is applied to NFTs. It is important that your will and your estate plan generally deals with the intellectual rights aspects of NFTs and how those rights pass.

If you own or are planning to acquire digital assets and need assistance with estate planning or separation, please contact us to discuss.