Digital Assets on Divorce & Death
According to the Collins Dictionary “something or someone that is an asset is considered useful or helps a person or organisation to be successful” or more simply an asset is “anything valuable or useful”.
By extension a Digital Asset is something that is held in a digital format or electronically that has a value or is capable of creating value.
For something to be held digitally and to be an asset, it must have a value. That value can be financial, sentimental, tangible or intangible. Digital Assets might include digital recordings such as videos, photographs, audio clips, as well as documents, electronic books and cryptocurrencies. So according to this definition, if a cryptocurrency has a value to someone, then it must be an asset however that asset is viewed or valued.
Under English Law there are two main categories of assets:
- Things that are in possession which include tangible, moveable and visible objects, property, business assets, cash etc.
- Things that are in action which include personal property which can only be claimed or enforced through legal action such as debts, shares, right to be sued etc.
The Law Commission recognises that digital assets do not easily sit within either definition and has recommended a change in the law both legislatively by Parliament and the development of common law by the Courts. The Law Commission’s key recommendations are that legislation should confirm that digital assets are capable of attracting property rights and that the government should establish a multi-disciplinary project to formulate or put in place a multi-disciplinary framework.
Divorce
Couples who are looking to resolve the financial aspect of their divorce whether outside of the court process or in proceedings are required to provide to each other full and frank financial disclosure. Anything of value owned by an individual or owed by them to a third party is disclosable, whether that value exists at the time of disclosure or is likely to arise in the future. Digital Assets, whatever form they take must therefore be disclosed by providing details of the size of the holding, the current value and any tax or charges, supported by documentary evidence of what is held and the assets’ current value. This would include but is not limited to crypto currencies, Non-Fungible Tokens, or other tokens or assets. Since Digital Assets fluctuate in value, it is important that throughout negotiations and/or proceedings such assets are regularly revalued. When calculating the value to the individual of Digital Assets it is important to calculate their net value by taking account where relevant any CGT or Income Tax that might be payable.
Death
On death digital assets are more likely to include:
- Online and electronically stored photographs and videos
- Blogs
- E-books
- Social media statuses and tweets
- Online gaming avatars, worlds and lands
- Information contained in documents such as emails
- Cryptocurrency
A person making a Will should discuss with their legal advisor the following:
- The issue of their proprietary rights as account holder over their digital asset;
- Transfer rights over digital assets on death;
- What to do about logins and passwords;
- Who to appoint as Legacy Contact in relation to Apple products;
- Intellectual Property & Confidentiality
- The possibility for the misuse of private information
A personal chattels legacy is one way to deal with succession to such assets, with provision often made for personal possessions to be left in a general gift with the spouse, executors or a chosen group of beneficiaries (such as children) given the power to decide how they are to be distributed.
However, the issue of Digital Assets is quite complex particularly whilst we wait for the government to take up the Law Commission’s recommendations for law reform. Until then, it remains the role of the courts to redefine the common law and provide judicial guidance on what amounts to a Digital Asset.
We at Spencer West have both family and private client lawyers who can advise on these issues and how they should be dealt with on divorce, estate planning or death. For more information please contact Richard Gilbert, Sangeeta Rabadia or Hilesh Chavda.
