Testamentary capacity – James v James [2018] EWHC 43 (Ch) – lessons to learn…

Testamentary capacity – James v James [2018] EWHC 43 (Ch) – lessons to learn…


Guest post

With people living longer, often with deteriorating mental capabilities, it is perhaps unsurprising that more and more questions are being raised about a person’s capacity to make a decision that undoubtedly has huge ramifications for their family members.  A solicitor tasked with preparing a Will has the very important task of drafting a Will that meets the testator’s requirements at the same time as ensuring that they only act for a testator who has testamentary capacity.  Over the years, various Wills have been tested in Court where criticism has been levelled at the solicitor who prepared the Will for failing to properly assess and document the testator’s testamentary capacity.

The recent case of James v James [2018] EWHC 43 (Ch) is one such case.  Charles James built up a large farming and haulage business in Dorset.  In 2007, he gave some land to his daughter

r, Karen.  In 2009, he transferred some land and his business to his son, Sam.  He then made a Will in 2010 leaving his remaining land and the residue of his estate to his daughters, Karen and Serena, and his wife, Sandra.  Sam was not a beneficiary.  After Mr James passed away, Sam brought several claims against his father’s estate including a claim that he lacked testamentary capacity to execute a valid Will in 2010.  The focus of this article is the testamentary capacity claim and the comments that the judge made about the preparation of the Will.  It does not address the other claims.  The claim proceeded to trial and evidence was obtained from various lay witnesses who knew Mr James, the solicitor who prepared the Will, other professionals who had dealings with Mr James and two expert witnesses being specialist, old age psychiatrists.

The first decision that the judge had to make before deciding this claim was what the applicable test for testamentary capacity actually is.  Practitioners will be well used to the test laid down in Banks v Goodfellow (1870) LR 5 QB which is as follows:-

It is essential…that a testator shall understand the nature of his act and its effects; shall understand the extent of the property of which he is disposing; shall be able to comprehend and appreciate the claims to which he ought to give effect, and, with a view to the latter object, that no disorder of the mind shall poison his affections, avert his sense of right, or prevent the exercise of his natural faculties, that no insane delusion shall influence his Will in disposing of his property and bring about a disposal which, if his mind had been sound, would not have been made.”

The waters have been muddied by the introduction of the Mental Capacity Act 2005 (“MCA”) which sets out a new test of capacity that is different to the principles of Banks v Goodfellow.  The MCA specifically sets out the test that the Court of Protection must apply when it is considering whether a living testator does not have testamentary capacity so that a statutory Will can be made for him instead.  The question is whether that is the test to also be applied by judges assessing testamentary capacity retrospectively once the testator has died and the Will that the testator himself has prepared is the subject of challenge.

In the section of his judgment entitled “Law”, the judge referred to various cases where different judges have grappled with the question of what the appropriate test now is.  After considering the comments made by these various other judges and analysing the wording of the MCA itself, the judge decided that it is still the test set out in Banks v Goodfellow that has to be applied when assessing whether a testator who has now died had testamentary capacity when he executed his Will.  Comments were made, both by the judge in James and in other cases that the wording of the MCA was very specific and that if Parliament had wanted the MCA test to trump Banks v Goodfellow, it would have made this abundantly clear.   In summary, the current position appears to be that all solicitors must consider the provisions of the Mental Capacity Act when they take instructions of whatever nature from a client.  When taking Will instructions, private client solicitors should also carefully consider the various limbs of Banks v Goodfellow and satisfy themselves that the testator before them satisfies that test.

As is often the case when a claim is advanced that the testator lacked testamentary capacity, both the claimant and defendants instructed experts in old age psychiatry.  Of course, neither of these experts met Mr James whilst he was alive and so their opinions were based on his medical records and witness statements.  The experts agreed that he suffered from Alzheimers resulting in moderate dementia.  They agreed that he met some of the Banks v Goodfellow requirements but differed in their opinion as to whether he had the capacity to appreciate the claims of his children on his estate.  Whilst helpful therefore, it was clear that the determination was by no means clear cut.

The evidence of the solicitor who took instructions and prepared the Will was perhaps even more crucial in this instance where the expert conclusions were not dissimilar.  Her file, witness statements and oral evidence were closely examined by both the barrister for the claimant and the judge.  Whilst the challenge that was made to the validity of the Will was that Mr James lacked testamentary capacity, the judge noted that five conversations concerning the content of the Will were held with the testator’s wife as opposed to the testator directly.  Whilst conversations between family members about the content of a Will are not unusual, solicitors should take great care to check that the information being provided and instructions being given emanates from the testator himself.

The family broadly accepted that from 2004 onwards, Mr James‘ capabilities declined.  There were several instances of confusion and memory loss recorded in their statements and the medical records had mentions of dementia and Alzheimers, although there did not appear to be any formal diagnosis.  It was extremely unfortunate that the solicitor’s attendance notes and letter of engagement failed to record any consideration of the requirements of Banks v Goodfellow with the conclusion that Mr James met that test.   It was also extremely unfortunate that the solicitor did not take any steps to comply with the so called “Golden Rule”.   That rule of practice is that in the case of an elderly testator or one who has suffered a serious illness, a medical practitioner should either approve or witness the Will having satisfied himself of the capacity and understanding of the testator.  No steps were taken by the solicitor at all to obtain any medical evidence to support the Will.  The feeling is that it is much less likely that there will be a lengthy dispute on capacity post death if medical evidence was obtained at the time the Will came into being.  In James, the judge stated that it was “obviously regrettable that a medical opinion was not obtained”.

Ultimately, in James, the judge upheld the validity of the Will.  Once again, the evidence of the solicitor who was actually involved in the drafting of the Will was crucial and perhaps even pivotal.  The judge stated that he was “particularly struck by the evidence of Ms Thomas (which I accept)”.  She was an experienced private client solicitor well used to acting for farming families.  Her oral evidence at trial was that Mr James showed no signs of confusion or ill health.  She acknowledged that some of his behaviour was out of the ordinary but that she felt that he had the requisite capacity to execute a valid Will in 2010 and that there was no need for a medical opinion to be obtained to support that view.

A private client solicitor’s role is to continually assess a testator’s capacity.  They are entitled to form the view that the testator has capacity and that no further, supporting evidence is required but their reasoning behind that decision will be tested in Court if a claim is advanced.  A solicitor who has the comfort of a full file complete with detailed attendance notes of the meetings, file notes referencing a consideration of all of the limbs of Banks v Goodfellow and a supporting medical opinion is likely to feel much more confident in their assessment being upheld when giving their evidence than a solicitor who does not have the benefit of such a full file.

(Author: Emma-Louise Green – Associate, Meridian Private Client LLP)

How professional executors protect your interests

How professional executors protect your interests


Ruth Pyatt, of Birketts, explains why a testator may choose to appoint a professional to administer their estate – and the pitfalls of not having this expert assistance.

One of the most important decisions to make when writing a will is who to appoint as an executor. Recent press coverage about this has principally focused on the potential costs involved where a professional executor administers an estate.

However, given that a reported one in three wills written in England includes the appointment of a professional executor (either to act alongside a family member, or on their own), it is worth looking at why people writing wills (testators) are willing to accept the costs involved, even if this is going to have an impact on the legacies that they leave to their heirs.

Why do testators appoint professional executors?

To prevent additional stress

A common reason for appointing a professional executor is that the testator wishes to allow their family to grieve, rather than be burdened with the responsibility of administering the financial affairs of a deceased loved one.

Some of us are not natural organisers and don’t cope well in a crisis. It can be of great comfort for a testator, especially one who is already ill and has gauged that their families are going to struggle with loss, to be able to nominate a professional to relieve the family of what they predict will be an unwelcome burden at a stressful and emotional time.

Trusts

Where a trust is involved, a testator will often opt to have a professional executor (and trustee). There may be ongoing family trusts or trusts for minors or vulnerable beneficiaries (which can continue long after the remainder of the estate has been settled). Many trusts are simple and require little professional input, but where matters are more involved, a professional trustee in the form of a trust corporation can assist with longevity and continuity.

Complex affairs

Sometimes a testator will appoint a professional executor because they are accustomed to delegating their complex affairs and have lifelong (or career-long) relationships with their advisors. Complex affairs can mean cross-border matters (such as domicile or overseas assets), tax (whether it be the taxation of an individual or an individual’s interest in a business), or because of the need to ensure that a business will continue to operate after the death of a key member. Professional advisers can be best placed to act as executors in these circumstances.

Potential conflict

Whether an estate is complex or not, if a testator knows that there is likely to be conflict following their death, a professional executor can be appointed to act as an impartial or neutral party. They can make decisions objectively and at a necessary distance from emotional complications.

Families may have longstanding disputes, or a testator may be aware that a dispute is likely to arise on their death, whether in relation to 1975 Act claims, claims of lack of capacity, undue influence or because, for example, an executor has been directed to take an action under the terms of the will that is likely to prove unpopular.

If a testator’s affairs are less complex on the whole, but there is an area of complexity for which a testator has always sought advice, professional executors can be appointed to deal with these matters, with the remainder of the deceased’s affairs being left for the family to manage.

Typical examples of this restricted executor role involve executors appointed specifically to deal with digital assets, a literary estate, intellectual property and/or assets abroad. Testators can also appoint separate executors to take over, on their death, the administration of an estate for which they themselves are acting as an executor.

In a similar vein, if a testator is aware that their (non-professional) executors will need to appoint professionals to provide advice, their own choice of professional can be appointed. This can be an important motivator.

Why might a lay executor need to seek professional advice?

There are a variety of tasks involved in the administration of an estate that a non-professional (lay) executor may find difficult to carry out or may even overlook. Such tasks include:

  • opening and operating an executor’s bank account to hold estate funds during the administration of the estate
  • insuring unoccupied properties
  • arranging access to funds or obtaining bridging loans for the payment of inheritance tax payable before probate is obtained
  • advertising for creditors in The Gazette and in a newspaper local to the deceased
  • paying debts and estate expenses in the correct order
  • calculating and paying interest on unpaid legacies after 12 months of the death
  • carrying out bankruptcy searches against beneficiaries before payment is made

Carrying out these tasks is important, because executors can find themselves personally liable if they’ve not been addressed and things go wrong later.

Why might executors find themselves personally liable?

Executors might find themselves personally liable to parties in a range of circumstances.

Executors can find themselves personally liable to beneficiaries and creditors. Where an executor acts in some way that a loss is caused to the estate, this is known as a wasting of assets (in legal terms, a devastavit). This might occur if, for example:

  • a legacy is paid where there are insufficient funds to pay a debt
  • an executor delays pursuing a claim on behalf of an estate which is subsequently time-barred (or a limitation defence arises)
  • an executor pays funds to the wrong beneficiary, or distributes the estate within six months of the grant of probate, having not adequately made enquiries as to whether there is a likely claim under the 1975 Act
  • an executor encashes an investment that was gathering interest without good cause

In the case of these and other cases of maladministration and/or negligence, an executor can find that they are personally liable to make good the loss from their own funds.

Executors can also find themselves personally liable to third parties. Where penalties and interest for inheritance tax are payable to HM Revenue & Customs, these payments might not be recoverable from the estate. If sums are paid to a bankrupt beneficiary, the executor is personally liable (on behalf of the bankrupt person’s creditors) to the bankrupt’s trustee in bankruptcy for the funds made over. If the estate is distributed and then the Department for Work and Pensions request a repayment of the deceased’s pension credit or other means-tested benefit, an executor may have to make the repayment from their own funds.

According to annual statistics from the Royal Courts of Justice, claims against executors are on the rise, but it is not clear from figures how many of these claims are against professional executors and how many are against non-professionals.

What if the executor can’t pay?

For beneficiaries, creditors and third parties, there can be peace of mind where a solicitor is appointed as a professional executor, as solicitors have professional indemnity insurance to cover these sorts of claims occurring.

Although specialist executor insurance is available for lay executors to buy, it is unlikely to have the same level of cover, and because few non-professionals understand the level of responsibility and challenges of being an executor, the availability of such insurance is limited, and uptake is currently relatively low.

(Author: Ruth Pyatt)

Raking over the ashes: rights to the body and funeral disputes

Raking over the ashes: rights to the body and funeral disputes


Ruth Pyatt looks at the issues surrounding who has the right to the body after death.

According to a provider of funeral plans in the UK, a quarter of deaths in the UK lead to family disputes, and over a fifth of these disputes concern the final resting place of the deceased’s ashes or coffin. Of the disputes disclosed, 49% apparently reached their peak during the funeral itself.

Perhaps that is not such a surprising statistic, when we take into account the number of people who have potentially competing claims. But who does have first right to the body or ashes? Is it the person who paid for the funeral, the next of kin, the person who signed the cremation form, the personal representative, or the coroner? And who decides who has priority? Is it the undertaker, the hospital, the court, or is it the deceased (in their will)? The basic starting point is that:

  • Nobody owns a body – there is no property in a dead body.
  • The person entitled to possession of the body is the person who is under a duty to dispose of the body.
  • A crematorium authority must hand over the ashes to the person who delivered the body for cremation.

Unfortunately, similar to family disputes, funeral disputes are often complex, and many cannot simply be resolved by applying the above three rules.

It should flow from the ‘no property in a corpse’ rule; that it is not possible for a body to be gifted or disposed of by a will, bought or sold. However, statute permits that a body (or part of it) may be donated for medicine or science, and whether or not a body can be disposed of in a will is a topic that is up for debate, too.

What about the testators’ wishes?

Until the end of last century, it was generally accepted law that the purpose of a will was to deal with the disposal of property, and since a body was not property, a testator’s instructions for the disposal of it were not legally binding or capable of being enforced. This, however, has been subject to challenge under Article 8 of the Human Rights Act 1998 relating to respect for family life, and is likely to also be open to challenge under Article 9, relating to freedom of conscience, thought and religion.

Who, then, is entitled to possession of the body? The law is quite specific in respect of this question. As we have seen, it is the person who is under a duty to dispose of the body, and the right to possession starts at the time of death.

Many would consider that the next of kin, a surviving spouse or partner, or other close family, would have first right, but that’s not necessarily the case:

  • First, a hospital has the right to detain a body if it is deemed that the body may be infectious, or if someone has died from a notifiable disease.
  • The coroner then has first right to take possession of the body. This is a right to take temporary possession, in order to determine the cause of death. Once the coroner has completed their examination, the body will be released.
  • If there is a will, the person entitled to possession is the named executor (whether a family member or not).
  • If there is no will, it is the person who has priority on intestacy (under rule 22 of the Non-Contentious Probate Rules).
  • Under a distinct set of rules, the parents of a minor child have a duty to arrange a funeral.

The term ‘next of kin’ means little in this regard. A surviving spouse may be entitled to possession of the body and to arrange the funeral by virtue of their appointment as an executor, or under the rules of intestacy, but in the case of an unmarried couple, where there is a death and no will, the surviving partner would have no automatic say in respect of the funeral.

That said, the fact that an executor or administrator is entitled to possession of a body does not mean that they will arrange the funeral without consultation. Executors (especially professional executors) often delegate responsibility for arranging a funeral to family (though the executor has the right to the final say and can overrule family members).

Disputes among executors

Where there is a dispute among executors and compromise cannot be reached, or if a will is subject to challenge (for example, through grounds of lack of capacity, undue influence, or want of due execution), there is recourse to the courts, although this will clearly lead to delay in the burial or cremation. In one reported case, seven months passed, during which time the deceased’s body remained in the custody of the coroner.

The statutory rules and orders that regulate cremation determine that ashes can only be handed over to the person who delivered the body for cremation (usually the executor). Crematorium paperwork contains questions designed to prevent the cremation of a body without the knowledge of close relatives and executors. Where disputes do arise about the ashes, and such cases appear before the court, the judgements given have not been consistent.

It appears that there is no legal definition of ashes, and whether ashes should be treated along with the body (under common law) and be incapable of being owned, or have the status of property, remains untested.

Finally, if this article gives the impression that lawyers make a lot of money out of death, according to a survey (by the same funeral plan provider that found that a quarter of deaths in the UK led to family disputes), those who have a legal career in their lifetimes have the most expensive funerals…

(Author: Ruth Pyatt)



Raking over the ashes: rights to the body and funeral disputes


Ruth Pyatt looks at the issues surrounding who has the right to the body after death.

According to a provider of funeral plans in the UK, a quarter of deaths in the UK lead to family disputes, and over a fifth of these disputes concern the final resting place of the deceased’s ashes or coffin. Of the disputes disclosed, 49% apparently reached their peak during the funeral itself.

Perhaps that is not such a surprising statistic, when we take into account the number of people who have potentially competing claims. But who does have first right to the body or ashes? Is it the person who paid for the funeral, the next of kin, the person who signed the cremation form, the personal representative, or the coroner? And who decides who has priority? Is it the undertaker, the hospital, the court, or is it the deceased (in their will)? The basic starting point is that:

  • Nobody owns a body – there is no property in a dead body.
  • The person entitled to possession of the body is the person who is under a duty to dispose of the body.
  • A crematorium authority must hand over the ashes to the person who delivered the body for cremation.

Unfortunately, similar to family disputes, funeral disputes are often complex, and many cannot simply be resolved by applying the above three rules.

It should flow from the ‘no property in a corpse’ rule; that it is not possible for a body to be gifted or disposed of by a will, bought or sold. However, statute permits that a body (or part of it) may be donated for medicine or science, and whether or not a body can be disposed of in a will is a topic that is up for debate, too.

What about the testators’ wishes?

Until the end of last century, it was generally accepted law that the purpose of a will was to deal with the disposal of property, and since a body was not property, a testator’s instructions for the disposal of it were not legally binding or capable of being enforced. This, however, has been subject to challenge under Article 8 of the Human Rights Act 1998 relating to respect for family life, and is likely to also be open to challenge under Article 9, relating to freedom of conscience, thought and religion.

Who, then, is entitled to possession of the body? The law is quite specific in respect of this question. As we have seen, it is the person who is under a duty to dispose of the body, and the right to possession starts at the time of death.

Many would consider that the next of kin, a surviving spouse or partner, or other close family, would have first right, but that’s not necessarily the case:

  • First, a hospital has the right to detain a body if it is deemed that the body may be infectious, or if someone has died from a notifiable disease.
  • The coroner then has first right to take possession of the body. This is a right to take temporary possession, in order to determine the cause of death. Once the coroner has completed their examination, the body will be released.
  • If there is a will, the person entitled to possession is the named executor (whether a family member or not).
  • If there is no will, it is the person who has priority on intestacy (under rule 22 of the Non-Contentious Probate Rules).
  • Under a distinct set of rules, the parents of a minor child have a duty to arrange a funeral.

The term ‘next of kin’ means little in this regard. A surviving spouse may be entitled to possession of the body and to arrange the funeral by virtue of their appointment as an executor, or under the rules of intestacy, but in the case of an unmarried couple, where there is a death and no will, the surviving partner would have no automatic say in respect of the funeral.

That said, the fact that an executor or administrator is entitled to possession of a body does not mean that they will arrange the funeral without consultation. Executors (especially professional executors) often delegate responsibility for arranging a funeral to family (though the executor has the right to the final say and can overrule family members).

Disputes among executors

Where there is a dispute among executors and compromise cannot be reached, or if a will is subject to challenge (for example, through grounds of lack of capacity, undue influence, or want of due execution), there is recourse to the courts, although this will clearly lead to delay in the burial or cremation. In one reported case, seven months passed, during which time the deceased’s body remained in the custody of the coroner.

The statutory rules and orders that regulate cremation determine that ashes can only be handed over to the person who delivered the body for cremation (usually the executor). Crematorium paperwork contains questions designed to prevent the cremation of a body without the knowledge of close relatives and executors. Where disputes do arise about the ashes, and such cases appear before the court, the judgements given have not been consistent.

It appears that there is no legal definition of ashes, and whether ashes should be treated along with the body (under common law) and be incapable of being owned, or have the status of property, remains untested.

Finally, if this article gives the impression that lawyers make a lot of money out of death, according to a survey (by the same funeral plan provider that found that a quarter of deaths in the UK led to family disputes), those who have a legal career in their lifetimes have the most expensive funerals…

(Author Ruth Pyatt)

Deeds of variation: ripe for abolition?

Deeds of variation: ripe for abolition?


Ruth Pyatt considers the importance and purpose of deeds of variation.

For some 20 years, there have been rumours of the abolition of deeds of variation. There has been some well-known cases involving deeds of variation, which have been well documented in the media – including a deed of variation to the estate of Ed Miliband’s father – which was more than reminiscent of the scandal surrounding deeds of variation to the estate of the late Tony Benn.

The crackdown on diverted profits (the so-called ‘Google tax’) and the introduction of new criminal sanctions for tax evasion, has left many feeling that the humble deed of variation, a lifeline for family solicitors and their clients for generations, has been rather tarnished by association.

So what is a deed of variation, and why is it important?

At its most simple, a deed of variation is a deed by a beneficiary (to a deceased’s estate) who wishes to alter what they are entitled to receive under the terms of the will, or under the rules of intestacy.

If a beneficiary opts to disclaim their right to inherit, the will or the rules of intestacy would determine who would benefit from the disclaimed part of the estate. But where a beneficiary opts instead to execute a deed of variation, that beneficiary has the freedom to choose who they wish to benefit from their share of the estate.

For property law purposes, the effect of the deed of variation is that the original beneficiary has made a gift of the redirected interest to the recipient (so a deed of variation cannot be used to avoid creditors).

However, legislation in terms of the Inheritance Tax Act 1984 (IHTA 1984) s.142 and the Taxation of Capital Gains Act 1992 (TCGA 1992) s.62(2) allows the original beneficiary to make an election for either inheritance tax purposes or capital gains tax purposes, or both. The effect of such an election is that for inheritance tax and/or capital gains tax purposes, the recipient is deemed to have inherited from the deceased, rather than received a gift from the original beneficiary.

S.142 IHTA 1984 prescribes that the variation must:

  • be in writing
  • be made by the person who would have benefited from the original gift
  • be made within 2 years of the death
  • not be made for consideration or money’s worth
  • contain a statement that s.142 IHTA 1984 is to apply

S.62(6) TCGA 1992 is similarly prescriptive.  If a variation meets the requirements of the tax legislation, significant tax savings can be made.

Pre-2007 and the introduction of the inheritance tax transferable nil-rate band, deeds of variation were often utilised to redirect assets away from a surviving spouse (and to pass wealth tax-free to the next generation).

Post-2007, deeds of variation are commonly used for a variety of purposes, including:

Intestacy

A reported 30 per cent of the population die without leaving a will. Where there is agreement between those who are due to benefit under the rules of intestacy, a deed of variation can be used to ensure that the estate is distributed according to the needs and wishes of the survivors and can, in some cases, permit a surviving spouse to retain their home.

Change of circumstances

Deeds of variation are also known as deeds of family arrangement, and it is often the case that the family of a deceased will agree between themselves that wealth should be shared other than had been conceived by the deceased. Families may enter into such agreements where there has been a change in circumstances for one or more of the family members (since the will was prepared or within the two years from the date of death) or because of, for example, perceived unfairness or error in the original will.

36per cent IHT tax rate, and other reliefs

Since the introduction of the 36 per cent rate in April 2012, deeds of variation are now commonly used to secure the 36 per cent rate (by ensuring that 10 per cent of the deceased’s net estate passes to charity). Similarly, deeds of variation are also used to ensure that other reliefs, such as business property relief and agricultural property relief, are utilised (by diverting assets from a surviving spouse).

Deeds of variation are therefore specifically provided for in tax legislation and are for tax planning purposes.

How, then, did it come to be that deeds of variation are now seen by many as tax avoidance and a ‘popular legal loophole’? That is not an easy question to answer. Though there does not appear to be any direct case law on the subject (the nearest being the case of Cancer Care Research Campaign v Ernest Brown [1997] STC 1425), many advisers consider that they have a duty to advise beneficiaries of the advantages that can be gained from deeds of variation and find the idea that such advice may make them complicit in some form of illegal conduct quite inconceivable.

(Author: Ruth Pyatt)

Protecting (and recovering) digital assets: online banking to bitcoins

Protecting (and recovering) digital assets: online banking to bitcoins


Ruth Pyatt explains the importance of making provision for the main digital assets that you hold, as well as the challenges faced by executors trying to recover them.

In February, Facebook US changed the way it deals with the passing of a user. It’s now possible for a user to nominate a legacy contact who can choose whether to close or memorialise an account when the user dies. It’s likely that Facebook UK will follow suit.

But what about other digital assets when someone dies? These are the questions you may be asking:

  • What happens to digital assets when I die or lose capacity?
  • Can I pass digital assets on in my will?
  • Do attorneys and executors have the right to deal with these assets in the event   of my losing capacity or dying?
  • How will my lawyer and executors access my digital assets, or even know that they exist?

Of course, there are different considerations for the families of a deceased person who may want access to a loved one’s email account and photograph collection, and an attorney or an executor attempting to manage and administer the estate of a person’s finances if they are incapax or deceased.

Bank accounts

For a probate lawyer, probably the most obvious digital asset that most of us have is an online bank account, through which we carry out internet banking.

Such accounts are usually easily traceable by attorneys and executors (even if there are no paper statements) through bank cards and cheque books and are dealt with on incapacity or death by the same means as any traditional passbook account.

Whether or not attorneys and executors will be able to continue to manage such accounts digitally depends on the terms and conditions of the bank or building society. Most banks have specific departments, with well-versed staff, to deal with bereavement, powers of attorney and deputyship.

Online payment accounts

One step on from digitised passbook accounts are online payment mechanisms, for example, PayPal and Amazon. Usually, the existence of such accounts can be established from statements from the more traditional bank accounts, which are linked to these online accounts.

Though such accounts often don’t usually have cash balances, it’s prudent for attorneys and executors to make due enquiries, as such accounts can contain refunds and credits from online transactions. Dealing with these entities is generally harder than dealing with high street banks, and more difficult still if the email address that the deceased used in relation to these accounts isn’t known.

Virtual currency

Virtual currencies, or cryptocurrencies, such as bitcoins, are a step further still. These currencies are traded from virtual or digital wallets stored in a virtual world. HMRC released a tax brief on such currencies in March 2014, and it’s understood that there are already a number of outlets in the UK including pubs, restaurants and internet retailers that accept payment in bitcoin. This is likely to be an area where the law will develop over the next few years.

Reward cards

Unlike virtual currencies, most of us have reward cards with one or more of the big supermarkets, for fuel or airlines and hotels. Whether or not the value of such bonus or reward schemes can be used by an attorney on behalf of an adult, or transferred after death, depends on the company administering the scheme.

For example, Tesco Clubcard and Sainsbury’s Nectar make it clear in their terms and conditions that rewards are transferrable on death; whereas British Airways’ Avios and BA Executive deem that points that are unused at the time of death are cancelled, together with membership of the scheme.

Digital media accounts

What about MP3s, digital movies and ebooks? Many would consider there to be value in their collection and would therefore assume that their collection could be accessed by their attorney and be passed on after their death.

However, in the case of subscription accounts such as iTunes, Google Play and Amazon Kindle, the position is generally that an individual has a limited licence to use the piece of music, movie or book, rather than ownership. As such, often both the collection and the account would be non-transferrable.

However, although there is no right to do so, and it’s not a published policy, Apple’s customer service team will often transfer an account following death. In addition, a device that holds such digital media may be transferred (along with any passwords) on incapacity or death, despite the non-transferability rules. But there would be nothing to stop the content providers suspending any accounts and access to the contents being lost.

Cloud storage

We increasingly store data that we create in the cloud, rather than on physical devices. For example, many of our digital photographs are now only stored online. The right to access such accounts is again subject to the specific terms of the relevant provider.

Typically, such accounts, and all data held in them, will be deleted when the holder ceases to pay the subscription fees, or dies. However, you are usually able to grant access rights to others, so it is worth giving a family member the ability to access your account and your photographs if you want them to have access after your death.

Following death, the account can then be dealt with by the family member, and the photographs downloaded or transferred to another account. Another alternative is to maintain offline backup, such as on an external hard drive that you regularly update.

Online gaming

Another area where the law is sure to progress is the world of online gaming. Despite platform providers’ end-user licence agreements dictating that gamers can’t own or transfer ownership to virtual items found or won online (despite auction sites such as ebay prohibiting users from buying and selling such items), there is a market in real-life currency for such virtual goods.

The future 

Dealing with digital assets under a power of attorney or will can present challenges and is likely to be an area of the law that attracts a lot of media attention.

While many digital assets are likely to have more of an emotional or sentimental, rather than financial, value, it’s an area of law that will raise new challenges for legal advisers of the digital generation.

(Author: Ruth Pyatt)