Estate Planning: Bequeathing your digital assets

This article first appeared in Personal Wealth, The Edge Financial Daily, on September 17, 2018.
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Digital assets, which include our Facebook and cryptocurrency accounts, have either concrete or sentimental value to many of us. But most people forget to include them in their wills, making things complicated for their heirs when the time comes.

Saw Leong Aun, group managing director of Rockwills International Group, says most people fail to include digital assets in their estate planning so the company recently introduced some clauses to help them with the process. In fact, most people in Malaysia do not even know what a digital asset is, he adds.

Several cases have highlighted the importance of transferring the ownership of your digital assets. In Germany, the parents of a 15-year-old girl who died in a train accident in 2012, fought for years to gain access to her Facebook account because they wanted to know if she had committed suicide. The social media giant refused to grant them access on the grounds of privacy.

“Her mother simply wanted to retrieve the girl’s messages on the social networking site, but Facebook refused to release these. So, she fought the company in court. After years of litigation, the German court finally said the messages were considered her assets and could be transferred to her family, just as you could leave your letters and diaries to your loved ones,” says Saw.

The late celebrity chef and television personality Anthony Bourdain left us an endearing example of remembering to include one’s digital assets in one’s estate when he bequeathed his frequent flier miles to his second wife. This is still a nascent concept globally, although more and more countries have started to explore this topic in the last five years.

In the UK, for example, The Society of Will Writers and Estate Planning Practitioners has developed clauses to help people leave instructions for their digital assets in their wills, says Saw. In the US, many states adopted a draft uniform law proposed by the Uniform Law Commission in 2015, which allows the executor to manage digital property and access electronic communications if consent is given on the record.

“Currently, there are no specific laws governing the distribution of digital assets. They are being developed in some states in the US, Australia and the UK. Since there are no such laws, the next best thing is to do so through a will or trust. This way, you can help family members go through the legal process to retrieve the digital assets,” says Saw.

“We foresee this picking up over the years, especially now that Generation X are at the stage where they have families and things to leave behind. The digital world is evolving so fast and getting so popular that you cannot run away from it.”

Without specific laws to address digital assets, the decision to allow access to social media accounts after the user’s death depends on the service provider. For instance, Yahoo! does not allow access to the deceased’s accounts while Google only allows access in certain circumstances.

Facebook users can name a legacy contact in their settings, but the contact’s actions are limited. For instance, he can write a new pinned post or update the profile picture, but he cannot read the user’s messages or log into the account.

“It still boils down to the service provider. And for most social media accounts that I am aware of, it is very clear that when you sign up and load your data there, the data belongs to them already,” says Saw.

“At least by including your digital assets in your will or trust, there is a process to retrieve it. The executor can use this to try and retrieve the data from the service provider. If it is a court order and you have probate, the case is stronger.”

 

A solution for Malaysians

Rockwills’ clauses help clients identify digital assets in their wills or trusts. The idea came about when clients started asking the company what could be done for their online trading accounts and other online transactional platforms.

“What prompted us was receiving inquiries from clients about what to do with their digital assets. A few of them have online accounts. Some do trading. So, they set up accounts such as PayPal. Nowadays, people with a little capital can set up their own online business and they need to have an account so people can pay them or they can pay their suppliers,” says Saw.

Broadly, there are two types of digital accounts — financial and non-financial. The former could be online trading accounts or e-wallets while the latter refers to assets that hold a more sentimental value such as photos in a social media account. However, these could still have financial value. For instance, a famous author may have unfinished manuscripts stored in the cloud that could be monetised.

“Or say you are a photographer and you upload your photos to the cloud. If you are somewhat well known and nobody knows your password, access may not be easily gained. Then, that collection of valuable photographs, which could either be sold or put on display, is lost,” says Rockwills Trustee Bhd deputy CEO Azhar Iskandar Hew.

Digital assets of a financial nature are more easily claimed if they are connected to a bank account. However, assets such as cryptocurrency accounts are trickier because there is no central agency in control.

Rockwills is currently helping its clients list their digital assets. “At a later stage, we will look at how we can help families in the recovery or retrieval process. But for now, we have come out with clauses that they can use to include digital assets in their wills,” says Saw.

None of its clients who have included digital assets in their wills has died thus far. So, these clauses have not been tested.

Rockwills advises clients to list down their accounts in their wills. After that, the clients appoint a digital facilitator, who will have the power to retrieve the digital assets for the executor, who is ultimately responsible for the distribution of assets.

“The facilitator must be someone you trust. It is not for him to gain access but to take relevant documents and data and give them to the executor, who will administer the assets. We do not want the digital facilitator to take action in distribution because some assets — such as cryptocurrencies, which are technically income — become part of the estate,” says Azhar.

Another document called the digital asset memorandum is created for the clients to list their passwords. The clients keep this document as they usually update their passwords over time. The facilitator is informed of the whereabouts of this document upon the death of the client.

For Muslims, the only difference in the process would be the distribution of the digital assets if they are physical assets such as cash from an online trading account. “This particular subject is very dynamic and will evolve over time. We are going to look at what other countries such as Australia, some states in the US and The Society of Will Writers and Estate Planning Practitioners in the UK are doing about this,” says Saw.

“I foresee these people introducing new laws to govern digital assets, especially now that some countries are trying to control the cryptocurrency environment. We will evolve with the new laws.”