There has been an increase in wealth being distributed in various forms of digital assets or platforms. For example, NFTs, cryptocurrencies such as Bitcoin or Ethereum or even online social networks or gaming accounts can have substantial value in them. Investing is no longer limited to its traditional forms, which has led to the emergence of many investments in alternative assets, most of which are done anonymously.
When thinking about how to plan the succession of digital assets, it would be useful to distinguish digital assets that are transferable from those that are not.
Transferable digital assets
Transferable digital assets include cryptocurrency, NFTs, funds held in online accounts such as Alipay or WeChat pay. These can usually be passed on by including provisions in a will. Most countries can treat them the same as any traditional asset (such as bank accounts or real estate) and require some form of grant of representation to access digital assets.
Some companies may even provide the functionality on their software platform whereby the user can designate a person as an emergency contact to receive the data in the user’s account under conditions specified by the user, such as in the event death or incapacity of the user. This feature would potentially allow an executor or trustee named in the user’s will (if there is one) to gain access to valuable personal, financial and business information after the user’s death before even to present an authenticated probate certificate to the company, as well as to act on this information for the benefit of the next generation of the user in accordance with the will. For example, Apple has a policy known as legacy contacts where the person set as the legacy contact can access photos, messages, notes (but not passwords, music, subscriptions, etc.) with only the access key generated when the legacy contact was fixed and the death certificate.
Given the popularity of digital assets, popular trading platforms for cryptocurrency and other digital assets already have some form of structured policy for dealing with deceased account holders. Some trading platforms have adopted the traditional requirements for dealing with any other physical asset, i.e. requiring beneficiaries to provide grant of representation, death certificate and other supporting documentation for allow access to the account of the deceased person, while other platforms offer their users the possibility to complete their know-your-customer procedure which allows the platform to identify the person using the account, and therefore help beneficiaries to access these accounts.
However, since there is currently no uniform standard on how to convey digital assets, the best and easiest method is to ensure that your beneficiaries are able to discover not only the digital assets you own. It is important to note that due to the highly secure and encrypted nature of digital assets, such that some form of password or key is required to access assets, it may be important to store these passwords in a safe place, but also to let your beneficiaries know how to access these passwords and keys.
Non-transferable digital assets
Non-transferable digital assets are generally digital assets that are licensed for personal use, but not owned in a legal sense. These include email accounts, social media IDs and accounts or mobile application accounts and the information they contain. These generally cannot be passed on simply by will and may require unconventional estate plans.
Despite the personal nature of these non-transferable Digital Assets preventing their transmission, it is possible to keep them in accordance with the wishes of the deceased person. For example, Instagram offers a service called “memorialization” of the deceased person’s account, which allows the memorialized account to be kept as if it were frozen in time. Facebook offers another service that allows the person to designate a legacy contact to manage the memorial account to some extent (such as writing a pinned post to share a final post or to update the profile picture, but does not allow to delete or modify past messages etc.). YouTube also provides an estate planning service known as Dormant Account Manager, which allows the individual to designate who should have access to information or whether the account should be deleted. Otherwise, individuals may need to go through customer service stages and, in the end, not even be able to access personal or important information.
Inheritance Tax Considerations
Digital assets (especially cryptocurrencies) can fluctuate rapidly in value. In Hong Kong, where inheritance tax has been abolished, this generally causes no concern. However, Digital Assets may also be based in other jurisdictions which impose inheritance tax, and therefore the applicable jurisdiction of the Digital Asset or the company through which the Digital Assets are held prior to ‘investing in these must be taken into account and taken into account during the succession. Planning.
With diverse forms of valuable assets and advances in technology offering new solutions for estate and asset security, individuals are faced with wealth protection and estate considerations more than ever. It is highly recommended that a legal framework be carefully planned to ensure that their wealth can be safeguarded from unwanted interference.