Introduction

Traditionally, estate planning is done for one’s physical and financial assets. Some examples of physical assets include real estate, expensive jewellery, and valuable artworks, whereas some examples of financial assets include money in bank accounts, equity, and insurance policies,

However, digital assets are often overlooked by most people when they do their estate planning. Digital assets such as electronic devices, digital files and data, email accounts, payment accounts, financial accounts, text messages, social media accounts, and (more recently) cryptocurrency wallets form a significant part of the legacy that you leave behind. For some, their digital assets could be valued in the millions or even billions. Certain types of digital assets such as social media accounts, can also generate consistent passive income.

With the ever-growing ubiquity of digital technologies, our approach towards estate planning needs to undergo a paradigm shift. In this month’s article, we will thus cover the main pointers to be observed when planning for your digital assets, and elaborate on how our Family Legacy Planning (“FLP”) team at Sim Mong Teck & Partners (“SMTP”) can assist in this respect.

Key steps towards planning for your digital assets

The first step to planning for your digital assets is to compile a list of  your digital assets. Having such a list is key towards ensuring that your executor can administer your estate with utmost efficiency, and preventing possible disputes amongst intended beneficiaries. As mentioned above, digital assets can include electronic devices, digital files and data, email accounts, payment accounts, financial accounts, text messages, social media accounts, and cryptocurrency wallets. In addition, this list should ideally also include access information on your listed digital assets, such as password and username information.

At this stage, another key consideration is to distinguish between a digital asset and a digital right, as the former can be passed down to your beneficiaries whereas the latter can be merely personal and thus incapable of being passed down. For example, if you have paid to use certain software, what you have paid for may only be a personal-use license; in such cases, the right to use the software cannot be passed on to other parties. If you are unsure on whether something of yours is a digital asset or a digital right, it is best to consult a lawyer.

After listing your digital assets, the second step is to compile a list of your digital liabilities. Some examples of digital liabilities include but are not limited to your automatic payment plans, online subscriptions (e.g., Patreon subscriptions), and renewal programmes. These digital liabilities must be terminated to prevent incurring additional costs for your estate in the long run. Similarly, the necessary access information should also be included in this list to facilitate a smooth termination process.

The third step is to specify your intended beneficiaries in your will or trust. However, sensitive details on your digital assets, such as password and username information, should not be included in your will itself, as wills become part of the public domain upon the passing of the testator. To maintain your privacy and confidentiality, such information should instead be contained in a sealed letter to be kept together with your will.

The fourth step is to execute a Lasting Power of Attorney (“LPA”) in respect of your digital assets. Whereas wills cater to the event of one’s death, an LPA instead addresses the event of one losing their mental incapacity. As previously covered in our November 2021 FLP Newsletter, an LPA is just as important as a will, as life can indeed be unpredictable and one may lose their mental capacity at any time. In Singapore, we use the LPA Form 2 for digital assets.

By way of brief summary, executing an LPA first involves finding a trusted and suitable donee. This donee shall have the responsibility of managing the donor’s affairs if the latter loses his or her mental capacity. Once you have identified a suitable donee, you will need to prepare the LPA Form 2. You will need to find a lawyer to draft it for you, and thereafter you, along with your donee, must sign it in front of your lawyer. Once signed, send it to the Office of the Public Guardian with clear NRIC or passport photos (yours and your donee’s). If all goes smoothly, your application should be accepted and registered within 3 weeks. Checking with institutions to determine which assets require a GOP to be distributed

How SMTP can assist

People already do estate planning for more “traditional” assets like real estate and cash, but for those who also have substantial digital assets, your estate planning needs to go a step further. While certain online service providers such as Google already have features granting executors and/or beneficiaries’ access to digital accounts, these features have their limitations. Ultimately, it is still safer to clearly set out your plans in your will or trust documents.

Planning for your digital assets in the event of death or incapacity will allow one to ensure that his or her digital assets end up in the hands of the right people. In the case of digital assets that hold value, you can pass these on to your intended beneficiaries. For digital assets of a private, confidential or sensitive nature, you can ensure that these are kept safe in the hands of those you trust. Without proper planning for your digital assets, your executors and/or beneficiaries might not be able to access them, especially if they are password-protected.

At SMTP, our FLP team provides a suite of services which includes advising and assisting on estate planning matters. Tapping on our wealth of experience and resources, we can guide you through the entire process of estate planning, be it advising on how to structure a trust, drafting a will, or preparing LPAs.

Conclusion

SMTP’s core philosophy is to provide bespoke legal advice based on our private clients’ specific needs and requirements, as cases always differ on their fine details. Our team of dedicated staff are ever eager and prepared to assist interested parties.

We also believe in close engagement with our clients, paying close attention to their individual facts and circumstances, and tailoring our advice and courses of action to cater to their specific needs and requirements. We understand that planning for digital assets is something relatively novel and can be a challenge to handle. Be that as it may, our team of professionals with their wealth of experience can assist to guide you through the relevant processes.

Should you or your clients require any assistance in estate planning matters, please feel free to contact our Business Development Team to schedule a consultation. We look forward to working with you.