Adapting to change: issues for digital estate planning

STEP (the Society of Trust and Estate Practitioners) and the Microsoft-funded Cloud Legal Project at Queen Mary University of London have recently collaborated on a joint research project into estate practitioner views on, and experiences with, digital assets.  

The survey was sent to STEP members globally and elicited more than 500 responses from a range of practitioners across the estate and wealth planning sectors and 41% of the respondents were based in the UK and Ireland.

Digital assets are becoming ever more entwined within our everyday lives, whether that is through the use of social media accounts, email accounts, the storage of music and photos or investment in cryptocurrencies such as bitcoin. The project and its findings have not come as a surprise to private client practitioners, who are becoming increasingly aware that clients are often unsure about how digital assets would be treated on death or incapacity or have had negative experiences in trying to deal with the digital assets of a deceased family member.

More than 90% of respondents to the survey thought that client demand for advice about digital assets would increase in future, with over 60% predicting a large increase.

Some of the key findings of the report were as follows:

Clients frequently experience difficulties accessing digital assets on death or incapacity of a family member, causing distress and frustration

A quarter of respondents reported that clients had experienced difficulties accessing or transferring digital assets on death or incapacity, with access to digital accounts or devices after death being one of the most common issues.

Neither legislation nor the terms and conditions of third-party service providers are sufficiently geared to alleviating these issues. The Computer Misuse Act 1990 actually prohibits unauthorised access to accounts and devices by third parties during lifetime or after death and the sharing of passwords and login details is often a breach of the service user agreement on many digital accounts. There is also a fundamental disconnect between protecting a person’s privacy interests and the interests of heirs in accessing digital assets.

Whilst some providers such as Facebook and Google do now have legacy functions which allow the account holder to nominate someone to take over your account, access or close it after a period of prolonged inactivity, the majority of third-party service providers have not yet prioritised the roll-out of a legacy function.

Third-party service providers can present practical, procedural and legal obstacles to both estate planning and estate administration

The survey asked respondents what obstacles they faced in dealing with digital assets stored in the cloud.

The most-cited obstacle was practical: most digital assets are subject to security measures that restrict access, such as password protection. The second most-cited obstacle was legal, namely a lack of clarity around property rights in digital assets and the third most-cited obstacle was a lack of proper estate planning by the deceased.

There is wide variation in policies, practices and tools for dealing with clients’ digital assets, highlighting the need for more education for practitioners on best practices

When it came to their own digital assets, less than 20% of respondents had used pre-planning tools themselves. These findings suggest that the estate planning industry should work towards establishing, collating and sharing best practices for helping clients with digital assets, both in estate planning and in estate administration.

Law reform is needed to enable effective estate planning and estate administration for digital assets

The USA seems to be ahead of the UK in this regard, with most US states and the US Virgin Islands having already implemented laws addressing access to email, social media accounts or other electronically stored assets upon a person’s incapacity or death.

These laws provide an example of how specific legislation can address the problem – and the need to balance the user’s expressed preferences, the provider’s terms of service, and the privacy of any third parties.

So what more needs to be done?

Education – The estate planning industry needs to work towards establishing, collating and sharing best practices for helping clients. There is also a need to raise public awareness of what constitutes a ‘digital asset’ and what happens on death or incapacity if you fail to make provision for these.

Collaboration – There is a clear need for collaboration between estate planning professionals and cloud service providers to highlight the issues and find more effective solutions for accessing digital assets on death or incapacity.

Legislation – There needs to be legislative reform so that legal systems provide clear rules around property rights and rights of access by personal representatives. The Law Commission of England and Wales started a project in relation to digital assets in 2021, but there need to be wider efforts and greater cross-border collaboration in order to achieve consistent international standards.

What can you do to plan effectively?

If you have concerns about how your digital assets may be dealt with on your death or incapacity or simply want advice on how best to plan for the effective management of your digital assets in these circumstances, please do get in touch.