In today’s digital world, we need to consider what happens to our online presence when we die, and ensure that our Last Will and Testament, as a legal document, includes provisions for digital assets. Digital assets are often ignored in estate planning and can cause problems. This article looks at why you need to include digital assets in your Last Will and Testament, specifically in the South African context.
What Are Digital Assets?
Digital assets are online records or possessions that have personal, sentimental or financial value. Generally these can be grouped into three categories:
- Social Assets: These include social media accounts and online profiles. Should they remain active, be memorialized or deleted? Platforms like Facebook offer an option to transform a profile into a memorial, a middle ground between deletion and lingering activity.
- Sentimental Assets: Digital assets like photos, videos, music collections and personal writings are the modern day equivalent of family heirlooms and photo albums. Make sure these are preserved for future generations and provide clear instructions on how to access or share these assets to avoid family feuds.
- Financial Assets: Accounts with monetary value like online businesses, cryptocurrencies, domains and income-generating platforms like blogs need attention. Not including these in your estate plan can result in unclaimed assets or legal headaches. It is crucial to specify named beneficiaries for these assets to ensure they are distributed according to your wishes.
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Types of Digital Assets to Consider
When it comes to digital assets, there are several types to consider when creating your estate plan. These include:
- Cryptocurrencies: Digital currencies like Bitcoin and Ethereum have become significant assets. Their value can fluctuate, making them a crucial part of your estate plan.
- Non-Fungible Tokens (NFTs): These unique digital assets can represent art, collectibles, and other items. NFTs have gained popularity and can hold substantial value.
- Other Digital Tokens: Tokens used in online gaming or social media platforms can also be valuable. These might include in-game currencies or special access tokens.
- Digital Collectibles: Rare in-game items or virtual real estate can be worth a lot, especially in gaming communities.
- Digital Art: Unique digital paintings or sculptures are modern-day art forms that can be highly valuable.
It’s essential to consider these types of digital assets when creating your estate plan, as they can have significant value and may require special handling.
Why You Need to Plan for Digital Assets
Ignoring digital assets in your estate plan can cause big problems. Unexpected legal fees can arise from mismanagement, adding financial burdens to your family. Take the case of James Howells who threw away a hard drive with millions in Bitcoin. Such mistakes show how important it is to manage your digital estate plan carefully to avoid financial loss and emotional distress.
And situations where family members are locked out of digital devices or accounts because of forgotten passwords or missing credentials can be just as painful. Make sure your loved ones have access to what they need to avoid heartache and smooth out the estate settlement process. Imagine a loved one unable to access cherished digital photos or important financial information – planning is key.
South African Legal Ramifications
In South Africa digital assets are not yet defined by law but they are part of estate planning. Executors need access to these accounts to manage assets so this is a critical part of planning. Consider setting up a testamentary trust to manage and distribute your digital assets according to your wishes.
Digital Executors
Globally there is a move to recognize Digital Executors but they are not yet formally recognized in all jurisdictions. Choosing a family member as a digital executor can be beneficial, but ensure they are capable of handling the responsibilities. In South Africa you can appoint a Digital Executor in your Will to provide clear instructions for your digital assets. You need to align with the platform’s terms of service and consider jurisdictional issues that may arise.
Digital Asset Plan
Creating a digital asset plan involves two key steps:
- Documenting Assets: Securely record all digital assets, including account details and access information. Programs like MyLifeLocker can help you manage this information securely. You can designate trusted people to access this information when needed. Regular updates ensure no assets are missed, from social media profiles to online banking details.
- Outlining Intentions: Clearly state how each digital asset should be handled. Whether you want deletion, memorialization or transfer, making these wishes known helps Executors fulfill your wishes. Specify which assets should be private and which can be shared or monetized to avoid confusion. While a last will deals with asset distribution, a living will provides directives for medical care during incapacity.
Managing and Distributing Digital Assets
Managing and distributing digital assets can be complex, especially if you have a large collection of crypto assets or other digital assets. Here are some tips to consider:
- Use a Digital Wallet: Store your digital assets securely in a digital wallet. This ensures they are protected and accessible when needed.
- Professional Executor: Consider using a professional executor or trustee to manage your digital assets after your passing. Their expertise can be invaluable in handling complex assets.
- Clear Instructions: Include detailed instructions for accessing and distributing your digital assets in your last will and testament. This helps ensure your final wishes are followed.
- Digital Asset Trust: Create a separate document, such as a digital asset trust, to manage and distribute your digital assets. This can provide additional security and clarity.
- Stay Organized: Keep your digital assets up to date and organized, including tracking passwords and access information. Regular updates prevent assets from being overlooked.
By taking these steps, you can ensure that your digital assets are managed and distributed according to your final wishes.
Using the Executor handbook at MyLifeLocker you can document all of your assets including your digital assets, and update these by simply logging into your account. The LifeLocker itself, does not exist on our servers, but simply an encrypted set of bits and bytes, so nobody can access your information except you, and your named, trusted keyholders.
You create keyholders, one of which is likely to be your Executor. At the appropriate time, they can login using their custom generated keyholder ID and access the services that you have given them access to. These services could include your funeral wishes, any messages that you have written, any documents that you have uploaded and of course, your LifeLocker.
For each digital asset, you can include the User ID and password, and then describe how you want that digital asset to be handled.
Without a LifeLocker, your Executor will need to guess how many online assets you have, presumably by going through your email accounts. If you have your LifeLocker in place, you can control which digital assets you would like your Executor to know about, and they only need to know about them at the appropriate time.
Avoiding Common Mistakes
When it comes to digital assets and estate planning, there are several common mistakes to avoid. These include:
- Exclusion from Estate Plan: Not including digital assets in your estate plan can lead to significant losses and complications.
- Password Management: Failing to keep track of passwords and access information can lock out your beneficiaries.
- Regular Updates: Not updating your digital assets regularly can result in outdated information and missed assets.
- Tax Implications: Overlooking the tax implications of digital assets can lead to unexpected liabilities.
- Professional Management: Not using a professional executor or trustee to manage digital assets can result in mismanagement.
By avoiding these common mistakes, you can ensure that your digital assets are handled correctly and according to your final wishes.
Special Considerations for Cryptocurrency
Cryptocurrency is a unique type of digital asset that requires special consideration when it comes to estate planning. Here are some special considerations to keep in mind:
- Volatility: Cryptocurrency is a highly volatile asset, and its value can fluctuate rapidly. This requires careful planning to manage potential gains or losses.
- Complexity: Cryptocurrency is not regulated by traditional financial institutions, and its ownership and transfer can be complex. Specialized knowledge is often needed.
- Tax Implications: Cryptocurrency may be subject to tax implications, including capital gains tax. Understanding these can help in planning your estate.
- Expert Management: Given its complexity, consider involving experts to manage and distribute your cryptocurrency. This ensures it is handled correctly and according to your final wishes.
By considering these special considerations, you can ensure that your cryptocurrency is handled correctly and according to your final wishes.
Tools and Resources
Using MyLifeLocker you can document and update your digital assets easily. These tools provide encryption and access controls so only designated people can see the information. Give your Executors user IDs, passwords and instructions for each digital asset so they can follow your wishes. These tools give you peace of mind that your digital presence is secure and accessible when needed. Some services offer free options for documenting and managing your digital assets, making it accessible for everyone.
Beneficiaries
Beneficiaries need to understand the value and nature of your digital assets. Many people don’t know how valuable digital assets like cryptocurrencies or online businesses can be. Misunderstanding or undervaluing these can result in big losses. Clear communication prevents oversights and mismanagement so beneficiaries are fully aware of what they will inherit. Discussing the value and management of these assets can avoid future conflicts. Special consideration should be given to minor children to ensure their inheritance is properly managed.
Conclusion
As we live more of our lives in the digital world, planning for these assets in your estate is more important. By organizing and documenting them and having clear instructions in your Will, you protect your sentimental and financial legacy. Secure your online presence now so it can be managed according to your wishes and avoid future problems and give yourself and your loved ones peace of mind. Act now and include digital asset planning in your estate process to protect the emotional and monetary value of these assets. Documenting your last wishes in your will ensures that your personal preferences are honored after your passing.
He has over 20 years of experience helping people to write their Will and other estate planning documents. He has been interviewed by many of the major news media outlets and has contributed to articles in most leading publications. He has also contributed to a number of financial planning books.
Throughout his career, Tim has written extensively on the subject of Will writing and estate planning.
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