Skip to content
Digital assets estate administration is becoming an increasingly important part of winding up deceased estates. Cryptocurrency, online businesses, websites, cloud storage and digital intellectual property may all have financial value, but they are often more difficult to identify and access than traditional assets.
ALSO READ: Blended estates under ANC: Administrative complexity and notice publication
An executor may know that the deceased owned a house, a vehicle or an investment account. It is not always as obvious that the deceased also owned cryptocurrency, earned income through an online platform or controlled a valuable website. When these assets are discovered late, the estate administration process may become more complicated.
What are digital assets?
Digital assets can include cryptocurrency, online banking or investment accounts, domain names, websites, cloud-based files, social media accounts and digital photographs. They may also include valuable intellectual property such as e-books, online courses, software, digital artwork and copyrighted content.
An online business can involve several connected assets. These may include the website, domain name, hosting account, customer database, payment platform, social media profiles and any intellectual property used by the business. Not every online account has a financial value or can be transferred to a beneficiary. Each account should nevertheless be identified and assessed before it is cancelled, transferred or excluded from the estate.
Digital assets estate administration and the executor’s duties
The executor is responsible for identifying and accounting for the assets belonging to the deceased. This can be difficult when digital property is not mentioned in the will or recorded in an accessible place. Evidence of an asset may only be discovered while reviewing bank statements, emails, business records or the deceased’s devices.
For example, payments from an online sales platform may reveal that the deceased operated an online business. A cryptocurrency exchange may appear on a bank statement, while domain renewal notices may point to websites owned by the deceased. Executors should ask family members, attorneys, accountants and business partners whether the deceased owned or controlled any digital assets.
According to Tasneem Mahomed, director at Engelsman Magabane Incorporated: “Digital assets estate administration is becoming mainstream. Five years ago, few estates included cryptocurrency. Now, many do. Executors must adapt to manage digital assets.”
Identifying and securing digital property
Once a digital asset has been identified, the executor should record the platform, type of asset, approximate value and whether it generates income. The location of relevant documents and access information should also be noted. However, passwords, private keys and cryptocurrency recovery phrases should not be placed in an ordinary estate inventory that may be shared with several parties. Security is particularly important in digital assets estate administration.
Cryptocurrency may become permanently inaccessible if a private key or recovery phrase is lost. An online business may also lose customers or income if its website hosting, payment services or domain registration are allowed to expire. Executors should preserve relevant devices and documents while following the access procedure required by the bank, exchange, platform or service provider.
Where cryptocurrency is held through an exchange, the executor may need to provide the death certificate, letters of executorship and proof of identity. Simply using the deceased’s login details may not be appropriate and could create legal or security concerns.
Valuation and tax considerations
Digital assets must be valued as part of the estate administration process. Cryptocurrency can fluctuate significantly in value, so the executor should retain evidence of the valuation date, exchange and market price used. Valuing an online business may be more complex. Its value could depend on income, operating costs, customer contracts, website traffic, subscribers, intellectual property and whether the business can continue without the deceased.
Tax treatment will depend on the type of digital asset and the deceased’s activities. Cryptocurrency gains or losses may be treated as revenue or capital, depending on the circumstances. Income generated through an online business may also have to be reported.
Professional tax advice may therefore be required, particularly where the deceased traded cryptocurrency regularly, conducted mining activities or earned significant income through digital platforms.
Recording and distributing digital assets
Assets with financial value should be properly reflected in the Liquidation and Distribution Account. The description should clearly identify the asset and its value without revealing confidential information. Passwords, recovery phrases and private keys should never be included in the account.
The way in which the asset is transferred will depend on its nature. A domain name may need to be transferred through its registrar. An online business may require the transfer of its website, hosting account, payment systems, customer database and intellectual property. Cryptocurrency may be transferred to a wallet controlled by the beneficiary or sold and distributed as cash.
The executor should keep a clear record of any transfer and ensure that access credentials are handed over through a secure method.
Accounts that should not be closed too soon
Some digital accounts may have little or no financial value but can still contain important information. Email accounts and cloud storage may provide evidence of assets, debts, contracts, subscriptions or tax records. Closing these accounts too early could make it more difficult to complete the administration of the estate.
At the same time, streaming services, hosting accounts, software subscriptions and cloud services may continue charging monthly fees. The executor should determine which accounts must be retained, transferred or cancelled.
Planning for digital assets
Digital assets estate administration is easier when the deceased maintained an updated record of important online accounts and property. This record should identify the assets and platforms without placing every password, recovery phrase and private key in one unsecured document.
Valuable digital assets should also be considered when drafting or updating a will. Clear planning can help the executor identify the assets and reduce the risk that financially or personally valuable digital property is permanently lost. Estate administration is deadline-driven, document-heavy and detail-sensitive. Every deceased estate notice has a purpose, with dates, information and estate numbers that must be correct.
Legal Notice Publishing manages the publication of deceased estate notices through the required Government Gazette and newspaper channels.
For assistance with deceased estate notices and Government Gazette publication, contact jana@legalnotice.co.za.
For legal advice, contact Engelsman Magabane Incorporated:
Phone: 053 832 8134 or 053 832 8135
Email: admin@engelsman.co.za
*This article was provided by Engelsman Magabane Incorporated and forms part of the Estate Matters series on Legal Notice Publishing. It is intended for general information only and should not be relied on as legal advice. Readers who require advice specific to their circumstances can consult Engelsman Magabane Incorporated directly.
