What do we own? How much of your digital content do you consider to be your own? The whole concept of ownership is different in the digital world. Most feel that their Twitter content is theirs, but is it? In the physical world we have some sense of what we own, where things are and we have a fairly good idea of how to value them. We organise things and put them in special places. We are conscious of how to keep things safe for others and future generations. How do we do this in our ever growing digital worlds?
The reality is that most of these days have some forms of digital assets, from simply a few photos on the hard drive of your computer to huge volumes of media content held in the cloud. These collections of digital assets often have a value in their own right.
We will have our own perceived material value of the assets based on what we paid for them, but this is unlikely to reflect their actual value in reality taking into account secondary value or lack of transferability. The most straightforward digital assets to value would be our credits in accounts like iTunes, which are effectively like digital money. (Someone should think of that… oh too late!). Other assets may inevitably have to be valued a little more subjectively. We are also likely to have assets that have a purely sentimental value. The latter may not need pricing up at all, but it will be really important for those nearest and dearest to you to consider them. You may even have some questionable content in your digital lives you would like someone to get rid of or you may leave bills that need dealing with.
This is not an area we have had to really think about before. It’s not even particularly on the professional advisors’ radar screens. However, these days people are amassing larger and more diverse collections of digital possessions. Cloud computing, along with the growing presence of networked devices, has provided people with the capability to have digital collections on a scale not possible before. It is estimated that at least half of the adult population in the UK has possessions stored digitally. Of these, 60% have considered digital possessions as a potential inheritance and the total of digital assets in this category is estimated to be around £2 billion, so it’s huge.
So, having valued them, then what? Well, of course the easy way would be to leave a list of all your security data with a trusted party or your executor so they can access your accounts. However, how does this balance against the need for the utmost security and the recommendations to change your passwords frequently and not to pass these or your login details to third parties? It simply doesn’t. Even if you ignore that, most digital accounts cover this in their T&C’s stating that accounts are not transferrable. So, even with some forethought, planning and risk taking, you may still leave family and friends with practical access difficulties.
One alternative may be to use a service like the aptly named iCroak. They help people to manage their digital assets and nominate a guardian who can look after matters should you, well, croak. They don’t however provide legal advice, but they can help you with those digital secrets. So, if you’re a closet fan of I’m a Barbie Girl by Aqua, but you don’t want your friends to know, that content could be deleted before anyone gets to see or hear it.
So, should your inheritance tax planning include your digital possessions? The short answer is, yes. For example, if the guardian of your digital content is a different individual to your executor, you would need to make both aware of their responsibilities. Any assets of material value would need to be taken into account as part of your estate in the “normal” way and may even give rise to an inheritance tax liability. Any digital content with sentimental value would not need to be included in your tax planning, however you may wish to cover this off in your will so that it gets into the right hands and doesn’t simply get lost in the ether.
On a final creepy note, there are sites now that provide a service that will allow you to send messages to your friends or foes after you do leave this mortal coil. So, if you want to communicate your wishes with regard to your digital content personally, you can. You can even Tweet from beyond the grave…whatever next!
If you need any help with understanding your inheritance tax situation, our Inheritance Tax Planner is free to use. If you need any help with your Aqua obsession, I’m afraid we are unable to help you.