- A Virtual Legacy
- April 8, 2014
- Law Firm: Withers Bergman LLP - New Haven Office
As our lives have become ever more virtual, the record of who we are and what we own is now increasingly likely to take a digital form and, from an estate planning perspective, digital assets give rise to new issues in relation to estate planning, wills and taxation.
Broadly our digital ‘estate’ falls into three categories: personal and sentimental items, financial information and something new - assets which only exist in virtual form. Such assets may already have a value or could acquire one in the future; accounts and characters in online games such as World of Warcraft, YouTube videos and domain names which may be significantly valuable in connection with business activities.
It is important to make good records of online assets - and keep those records up to date - so that your executors and beneficiaries at least know what there is and where to look for it. There are various ways of doing this. Leaving details of passwords access codes etc in a will or in a note left with the will may seem a good idea but this sort of information may change regularly in which case a codicil will be required to amend the will with consequent expense. Also a will is published after death and so including information such as passwords would be inadvisable. Out of date information can also be worse than useless.
An online storage arrangement is potentially a good solution and there are a number on the market. Executors and/ or beneficiaries have details of the access code to the online storage facility you have chosen to use and everything else is in there. There are, however, various concerns about using this kind of service. What happens if the company goes into liquidation? Can you then access your own data to move it somewhere else or is it lost or frozen by the administrators? Security worries may also be significant - not only from external hackers, but also from the staff members at the companies concerned - you have, of course, just given them all the details of your financial life. The question of updating still arises although some of the services do offer an annual reminder to check and update your account details but, of course, you need to actually do so.
Is it all worth anything? There are now some assets which only exist in digital form and which, it might be assumed, are worth nothing at all. Massive Multi-player Online Role Playing games are a good example. Such common accounts as World of Warcraft and RuneScape are now played by millions. An experienced and wealthy game ‘character’ takes time to create - and it appears it may be possible to sell such characters online. What such an asset would be worth for inheritance tax purposes on death is unclear as the market in this kind of asset is very new. This may allow your executors to argue for a very low value - hence less inheritance tax.
To take another example, uploading a video to your YouTube channel can also make you some money. You can opt in your channel for monetization - a partner arrangement with a YouTube advertising company- which may enable eligible videos where you own the copyright to earn money from relevant advertiser friendly content. If the video has a large number of views then earnings could potentially be significant.
So far as your will is concerned, this should be reviewed to ensure that its provisions cover your digital estate. Digital assets are unlikely to have been specifically bequeathed but this may not be required as many ‘virtual’ assets are normal assets which happen to be held in digital form - photographs or an online bank account. By contrast, other assets which only exist virtually may require special treatment in a will. For example, a general legacy of personal items may not be wide enough to include a World of Warcraft character. A specific ‘digital assets’ legacy may therefore be something to consider in appropriate situations and Withers has developed some wording for this.