Posted by John North, Partner
Don’t forget digital! Estates are being undervalued as online assets are missed out.
The online world is so entwined with our reality nowadays that we could be forgiven for forgetting, or underestimating, how many accounts and profiles we have created for ourselves over the years.
That being said, some of these accounts can hold monetary value which must be assessed as part of your estate when you die. The Institute of Legacy Management warn that digital assets are going undeclared, which can leave estates undervalued for IHT purposes, leading to financial penalties.
It is essential that personal representatives (PRs) (the collective term for executors and administrators), correctly assess the value of a deceased’s estate when calculating the Inheritance Tax (IHT) liability.
If the estate is overvalued, then too much IHT may be paid to HMRC: granted, this will be duly rebated, but only after (a) proving that the initial calculation overstated the value of the estate, and (b) HMRC’s internal processes have been completed.
If the estate is undervalued, HMRC may not be so forgiving. In the short term, too little IHT will have been paid compared to the true liability of the estate. In the long term, further payments of the outstanding IHT and interest will of course need to be made, and HMRC may choose to investigate the estate further to assess whether reasonable care was taken by the PRs to locate all assets. Failure to demonstrate such care may lead to a penalty of up to 100% of the additional liability.
So, what can you do about your digital assets?
Keep a list! Somewhere, in a password-protected file, keep some sort of list, anonymised or otherwise, of the websites or companies with which you hold accounts. Keep somewhere else (preferably completely separate to the first file) a list of the usernames or emails used to identify your accounts.
Keep these lists safe and, preferably, separate. If you would like peace of mind however, your solicitor should be able to hold them with your Will in deeds storage.
What kind of accounts should I list?
When making your list, consider the following platforms, websites and accounts:
- Bank/PayPal/eBay/Amazon accounts
- Social media accounts
- Internet domains and any personally-managed websites or blogs
- Loyalty rewards programmes
- Digital download accounts such as iTunes/Spotify/Kindle/TV Catch Up/Netflix.
To start with, try to think of any accounts which have any credit in your favour – the most important issue will be to ensure that your PRs have properly assessed the value of your entire estate.
You may also be able to suspend some accounts for memorial purposes, but it is important to consider what will happen to those accounts which have real monetary value.
If you have any enquiries regarding online assets or inheritance tax, please contact us on:
0800 923 2073 Email us