The Importance of Estate Planning in a Digital Age
For many of us the Coronavirus pandemic has brought things sharply into perspective and led us to re-evaluate our priorities, whether that means spending more time with loved ones, making time for hobbies and exercise, or just getting outdoors.
Some of us may also have felt a more pressing need to get our affairs in order, so that our loved ones are not left in a difficult position in the event of our hospitalisation or, in the worst case, our passing. Though it is often hard to think about such eventualities, it is better to prepare now and know that our family and friends will not be left with the enormous administrative burden of dealing with an unorganised estate or be faced with the stress of making health or financial decisions that they are not prepared for.
Now that we are in a third national lockdown, more and more of us are finding ourselves leading increasingly digital lives. This means that estate planning – that is, making preparations for how our assets will be managed in the event our incapacitation or death – often now includes digital, as well as physical, assets. Digital assets do not leave a paper trail and can be subject to strict privacy policies, so can easily be lost, hidden or inaccessible. It is therefore important that other trusted parties are aware of their existence and that there are clear instructions as to how they should be dealt with after we’re gone.
What is a digital asset?
In simple terms, a “digital asset” is a non-physical asset that exists online or in a digital device. Some examples of digital assets include:
- Bank accounts, credit cards, PayPal accounts
- Virtual currencies/cryptocurrencies such as BitCoin
- Online rewards programmes and loyalty points such as Air Miles and Clubcard
- Digital photographs, videos, music and film purchases, e-books, information and documents stored on cloud accounts
- Websites, blogs, social media accounts, smart-phone applications and data stored on those applications, domain names you own, intellectual property, trademarks
Protecting Your Digital Assets
Despite the ever-growing use and exchange of online data, many people often omit their digital assets from their estate plans. By following the steps below you can ensure that your digital estate is organised and protected.
1. List all your digital assets and how to access them
Firstly, it is crucial to complete an inventory of all your digital assets. Make sure it contains the username, password, e-mail or phone number associated with any online account and is stored in a secure location.
2. Decide what should happen with each digital asset after your death
Once you’ve created your list, you must decide what is to happen to each of those assets. You may, for example, want digital memories with sentimental value to pass to certain family members, digital assets with monetary value to go to your spouse or children, and income-generating assets, relating to an online business, to go to a business partner. You may want some information to be erased and some retained, certain accounts to be shut down, and others memorialised.
3. Familiarise yourself with privacy policies
Visit the websites and applications and familiarise yourself with the privacy policies and security rules relating to a user’s death. The service provider’s contractual terms and conditions will govern what your representative can do; for example they may be able to close an account or get a copy of files, but terms often specify that services or purchases are non-transferable and terminate upon the death of the account-holder.
Some platforms will simply turn off the account and delete all information, irrespective of sentimental or financial value, if there is no activity within a certain period of time. Others may offer a means to give permission to another person to manage the account and data. Facebook, for example, allows you to appoint a ‘Legacy Contact’, such as a family member or friend who will be able to manage your memorialised account, whilst Google allows you to give an “Inactive Account Manager” access to your Google account in certain circumstances.
4. Appoint a digital executor
It is also sensible to appoint a ‘digital executor’ to carry out your wishes in respect of your digital property. This person will be in charge of managing your digital assets which may involve finding, downloading, converting, distributing or destroying them. While a digital executor is not necessarily a legally binding appointment, it is still prudent to name the designated person in your Will.
Essential Estate Planning
1. Make a Will
Your Will is quite possibly the most important legal document you will make. It allows you to appoint executors to administer your estate, choose guardians for your children, and determine who should receive everything you own after you die. If you die without a valid Will (“intestate”), the law makes these decisions for you. This could have unintended consequences, such as your loved ones not being adequately provided for, charitable causes close to your heart not receiving a desired legacy, or additional Inheritance Tax being payable by your estate.
A carefully drafted Will can ensure that your estate is distributed in accordance with your wishes and in a tax efficient manner and your loved ones are taken care of. It will also reduce the risk of those closest to you having to bring costly legal proceedings to rectify the default position under the intestacy rules.
2. Lasting Powers of Attorney
Lasting Powers of Attorney (LPAs) can also be hugely helpful documents to have in place. An LPA allows you to appoint trusted family members or friends as your ‘attorneys’, to make decisions about your welfare and your property and financial affairs if you lose mental capacity or are physically incapacitated, permanently or temporarily.
If you lose capacity and are unable to make decisions for yourself, and you have not granted powers of attorney to anyone or your appointed attorney can no longer act, then your loved ones will need to apply to court for a deputyship order. This is a lengthy and expensive process, and may result in the appointment of a deputy that you do not know well or trust. By making arrangements now, you can save your loved ones the stress and expense of trying to remedy the problem after the event.
3. Keep a record of your assets
Ensuring that you have a documented record of everything you own, both physical and digital, is an important part of estate planning. An estate binder with any and all relevant documentation and correspondence, including a list of all your digital assets, can prove an invaluable tool for the family member or friend who is tasked with administering your estate. It will avoid the time and expense involved in trying to decipher what was in your estate without any information.
4. Don’t delay
The global health crisis we are facing has highlighted the fact that we never quite know what is around the corner. It is now more important than ever to ensure that your estate planning documents are up to date so that if the worst were to happen, you have the peace of mind in knowing your personal matters are taken care of and your loved ones will be looked after.
Our experienced Private Client team are experts in all aspects of estate planning. Contact Freeths to find out how we can help you.
The content of this page is a summary of the law in force at the date of publication and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.
‘Doing the right thing’ is at the heart of Freeths. Find out more about our excellent client service and the strong set of values that guide the way we work.
Talk to us
Freeths are a leading national law firm with 13 offices across the UK. If you have a query about our services or just want to find out more, why not give us a call?
Contact: 03301 001 014