What Are Digital Assets and Why Are They Relevant To Your Estate
What is Estate Planning
Estate planning is the process of providing assets to the next generation, ensuring beneficiaries are protected and tax implications and expenses are minimized or reduced. A common tool used to plan an estate is a Will and Ian Burroughs, Partner at Kerfoot Burroughs LLP, earlier highlighted the top 10 reasons to have a Will – see here.
It is safe to say most people today engage in the digital world and it is important to put your mind to what will happen to these assets when you pass away. Digital assets can have financial, personal and reputational implications. A Study conducted by McAfee in 2013 suggests Canadians value their digital assets at an average of more than $32,000.00 and the popularity of digital assets has increased since 2013.
In general, digital assets can be categorized as commercial assets, assets on devices or loyalty programs. Commercial assets are revenue-generating websites, online content where an individual gets paid to contribute to a website, and cryptocurrencies such as bitcoin. Assets that can be found on devices are music, emails, photos, videos, social media accounts and games that can have significant monetary and sentimental value. Thirdly, loyalty programs with stores, hotels or airlines can have substantial value.
Difference between Digital Assets and Traditional Assets
Digital assets are normally accessed through the internet or stored on a device such as a computer or smart phone. Traditional assets are physical assets that one can touch and take hold of. Due to the nature of the digital assets the following are some issues that can arise:
- Difficult to locate – Digital assets are much harder to locate than physical assets. Many people are going paperless, hence making it difficult for executors to ascertain the existence of thee asset. Physical assets such as jewellery, artwork, vehicles and etcetera can easily be found. However, assets online can be difficult to find and will require some online detective work from the executors. Without a paper trail, it can be difficult to know whether the deceased subscribed to certain revenue generating websites, games that pay its subscribers or different email addresses. An executor may consider hiring a computer forensic expert to ascertain which websites the deceased visited or accessed and what value there might be online.
- Access – The Deceased’s computer, smartphone or tablet may require a password to access it. Without the password, it will be difficult to gain access to the device. Additionally, the same issue exists if the personal representative does not have the usernames and passwords to websites. Secondly, if the personal representative does have the username and password for a website they may be in breach of the terms of service the deceased agreed to when signing up for the website or online service. These terms of service are not negotiable and most users don’t read the terms of service. Majority of people simply scroll to the end of the terms of service and click “I agree” and hence agree to legally binding terms that are enforceable in Canada. Most websites will not provide the login information regardless of the individuals relationship to the deceased. Therefore, emails, photographs and videos with great sentimental value can be lost if access is not considered when planning your estate.
- Ownership – Many people do not realize that they do not actually own certain “assets” but rather have the right to access or use it. For example, e-books and music that are downloaded are not owned by the user, the user just has a licence to read the e-book or listen to the music. The relevance here is that when one passes away they cannot have their e-book collection or music collection transferred to their beneficiaries.
A Facebook account is another example where the user only has a license. The license here is to use the website and therefore a Facebook account cannot be transferred. Facebook will either delete the account or memorialize it. Once an account is memorialized, no one can sign into the account, no editing can be done to the account and it merely allows friends and family to post on the deceased’s profile page.
Planning for your Digital Assets
Planning for you Digital Assets means you will need to leave a detailed list of the assets, usernames and password information, and specific instructions on how to deal with the digital assets. A trustee needs to be instructed to destroy these items or to who they are to be passed on to. For instance, do you want your children reading your emails or family reading your personal information.
Instructions for a trustee can be left in a Will or a Digital Asset Trust. Details can be addressed in a Will; however, login information should not be included in the Will as the Will become a public document in the process of administering the estate. The benefit of a Digital Asset Trust is that it would allow access to digital assets that are licences that expire at the date of death.
It is crucial to properly plan for your digital assets in addition to you physical assets so they do not become inaccessible. Additionally, many online service providers are located in the United States or other jurisdictions which could result in large delays and cost if access is not provided to your Trustee.
We at Kerfoot Burroughs LLP are experienced in estate planning. We can help guide you to make the key decisions that are important in ensuring your estate is properly planned. If you currently have an estate plan and wish to review it or wish to establish an estate plan please contact Daleep Aujlay at 604-638-6935 or email@example.com.