Taking care of your digital assets

In 2012 a wild story was spreading across the internet that the actor Bruce Willis was intending to sue Apple to get the right to “bequeath his extensive iTunes music collection” to his daughters.[1] Although that story turned out to be a hoax, it raised questions and started a debate about digital assets and whether they can be inherited.

As lives become more online, it is increasingly important to think about what should happen to your digital assets after your death. It can be very easy to overlook your digital assets when thinking about your estate but they may be valuable and may be lost if not dealt with properly in your will.

What are digital assets?

There is no definition of digital assets currently in NZ legislation but it is generally understood to include anything you own or that you use that exists in a digital form such as:

·         cryptocurrency;

·         NFTs;

·         social media accounts (Instagram, X, TikTok, YouTube etc);

·         email accounts;

·         downloaded digital content (eg digital music, films, tv shows purchased through iTunes/Amazon or e-books);

·         airline frequent flyer points (eg Air New Zealand Airpoints);

·         domain names.

NZ legal landscape on digital assets

Law reform?

The NZ Parliament has conducted an inquiry into the “current and future nature, impact, and risks of cryptocurrencies” which was recently released.[2] One of the recommendations was that MBIE should explore whether there should be legislative intervention to remove uncertainty, as considered by the UK Law Commission in its consultation paper on “Digital Assets”.[3] The legislation initially discussed in that paper would have included the creation of a new category of personal property which would apply to digital assets.

In more recent years the common law in England and Wales has moved towards the recognition of a third category of personal property by confirming that intangible things such as crypto-tokens attract personal property rights even though they do not fit neatly within the two types of personal property traditionally recognised by the law (being “things in possession” and “things in action”).

The UK Law Commission ultimately concluded that legislative intervention was not necessary and may be too constraining and that the common law could continue to evolve to encompass new assets created by developing technologies.

Case law

While NZ law applying to digital assets is still developing, a few NZ cases have already considered whether cryptocurrency can be considered property.

Ruscoe v Cryptopia Ltd (in liq)[4]

Cryptopia was a cryptocurrency exchange based in Christchurch that was hacked in 2019. Soon after the hack, Cryptopia was liquidated and its liquidators sought directions in the High Court on the legal status of a number of cryptocurrencies held by Cryptopia.

Justice Glendall concluded that cryptocurrencies are “property” within the definition outlined in s 2 of the Companies Act and “also probably more generally”. Glendall J found that cryptocurrency satisfies the four characteristics of “property” as it is:

·         definable;

·         identifiable by third parties;

·         capable of assumption by third parties; and

·         having some degree of permanence.

Beck v Wilkerson[5]

This Family Court case dealt with cryptocurrency (Litecoin) in an application for orders dividing relationship property. Ryan J accepted that the Litecoin held in the parties’ digital wallet was “obviously relationship property assets”.

Can you transfer your digital assets to your loved ones in your will or in another way?

It depends on the type of digital asset that you want to transfer.

Cryptocurrencies and NFTs

Yes, as cryptocurrencies are capable of being treated as “property” they can be transferred under your will.

While there are no cases to date in NZ that consider whether NFTs can be treated as “property”, given the treatment of cryptocurrency in the cases discussed above, it is likely that NFTs may also be considered property that can be transferred under your will.

However, there are some practical steps that you should take in addition to just listing the cryptocurrencies and NFTs to be transferred under your will. You will need to make plans to ensure that your executors know where to find the unique private keys and about the form of your wallet. Your executors or the person receiving your cryptocurrencies or NFTs may also need access to your phone and email accounts as well for the two-factor authentication.

Social media accounts

No, in general social media accounts are non-transferable because their policies prohibit you from sharing your password. However, your account may be able to be memorialised or deleted/deactivated. You should check the policy of the platform for more detail.

Photos and content stored in your cloud accounts

You can grant access to your cloud account to certain people depending on the provider.

·         Apple iCloud: The Legacy Contact feature allows you to grant certain people access to your iCloud account.[6]

·         Google Drive: Google’s “inactive account manager” tool allows you to share your data with certain trusted contacts that you nominated.

·         Dropbox: Your immediate family member or executor can request your account to be deactivated. There is also a process to request access to your Dropbox account but the person requesting access will need to show that they have the legal right to access your files by providing a valid court order.[7]

Downloaded digital content (digital music, films, tv shows or e-books)

No, when you purchase digital music, films or tv shows on iTunes/Amazon or an e-book from Amazon, you are purchasing a non-transferable licence to use it while you are alive. This digitally downloaded content cannot be transferred to your loved ones after your death.

Airline frequent flyer points

You will need to check the policies set by the specific airlines. Some airlines (eg Air NZ and Emirates) may allow a deceased member’s points to be transferred to a legal beneficiary. However, this transfer may be subject to several restrictions such as a minimum threshold for the number of points, a time limit for the claim and the requirement for a will or court order to be provided.

Other airlines (eg Qantas and Singapore Airlines) have a strict policy of cancelling any frequent flyer points earned but not redeemed before the death of a member.

What can you do now to protect your digital legacy?

·         Create an inventory of your digital assets and devices (for two-factor authentication) and review it regularly so that it is up to date.

·         Think about appointing a “digital executor” in your will to manage your digital assets after your death.                                                            

·         Provide the “digital executor” with clear instructions on what to do with your digital assets and give that person access to your inventory of digital assets. For example, which assets should be deactivated, deleted or transferred.

·         Check the terms of service to make sure that you have the power to transfer the digital assets that you want to include in your will.

[1] Opinion: Why the Bruce Willis Apple iTunes story matters | Computerworld

[2] https://selectcommittees.parliament.nz/v/2/c44bdcd6-2624-4f7a-badd-1ce20b93206d

[3] Digital assets - Law Commission

[4] Ruscoe v Cryptopia Ltd (in liq) [2020] 2 NZLR 809

[5] Beck v Wilkerson [2019] NZFC 9883

[6] https://support.apple.com/en-nz/HT212360

[7] https://help.dropbox.com/account-settings/access-account-of-someone-who-passed-away#:~:text=To%20request%20access%20to%20the,files%20under%20all%20applicable%20laws