Nowadays, almost every person owns numerous accounts on the internet. Once you have created one on social networks, with an email provider and other cloud services, your data is stored online. With the increasing digitalisation of everyday life, the question of the extent to which a person’s digital estate can be inherited is also becoming more critical. What happens to the stored data after our death, and who has access to it?
The steadily increasing trade in cryptocurrencies also raises problems concerning the digital estate and, particularly, the access of heirs to cryptocurrency assets and tax law issues.
The following article will outline the legal aspects of the digital estate in Germany. If you have any questions or need individual and personal legal advice, don’t hesitate to get in touch with the lawyers of Schlun & Elseven Rechtsanwälte PartG MbB.
What is Meant by the Term “Digital Estate”?
A person’s digital estate includes all their digital assets, such as the contractual relationships between this person and the providers of digital services (such as social networks, emails or databases).
The contents of the corresponding accounts also constitute part of the digital estate, including personal data, emails and address books. Domains and other rights to websites are also recorded.
It should be remembered that assets in cryptocurrencies such as Bitcoin and Ethereum also belong to the digital assets and, thus, to a person’s digital estate.
The data stored in social networks and other databases regularly remain with the corresponding provider after death. However, as a rule, the heirs enter into the respective user agreements by universal succession under § 1922 BGB.
Consequently, they also have access to the stored data. However, the situation is different if access by the heirs is contractually excluded.
The Decision of the Federal Supreme Court (BGH) on the Digital Estate
In 2018, the Federal Supreme Court (BGH) ruled that the contract of use of an account on a social network is inheritable (BGH, judgment of 12 July 2018, ref.: III ZR 183/17, para. 22). Accordingly, the heirs enter into the contractual legal position under § 1922 (1) German Civil Code (BGB), so that any rights and obligations of the deceased under the contract of use pass to them. This matter also applies, in principle, to email accounts.
The Federal Supreme Court (BGH) had to decide whether the inheriting mother had a claim against Facebook for access to the Facebook account of her deceased daughter. The Federal Supreme Court answered in the affirmative.
According to the Federal Supreme Court, the contract of use for an account on a social network is generally transferred to the heirs of the original account holder by universal succession. The heirs then have a claim to access the account along with the communication content.
In a recent decision, the BGH made it clear that access to the user account includes the possibility to take note of the account and its contents in the same way as the deceased was able to (BGH, decision of 27.8.2020, ref.: III ZB 30/20). However, the heirs are not entitled to use the account actively.
According to the BGH, such a contract is not of a highly personal nature. The resulting obligation of the network operator to transmit and provide messages and other content is account-related. Irrespective of this, however, legal positions with highly personal content are also passed to the heirs, as is the case with diaries and personal letters.
Regarding the data protection of the communication partners, the BGH pointed out that processing their personal data in the context of the transmission and provision of messages was permissible under the General Data Protection Regulation (GDPR). This was because the processing was necessary for the performance of the contractual obligations of the social network operator vis-à-vis the communication partners of the original account holder (Art. 6 para. 1 lit. b Var. 1 DSGVO).
Additionally, as they enter into the user relationship, there would be legitimate overriding interests of the heirs (Art. 6 para. 1 lit. f DSGVO).
Regulation of the Digital Estate at Google and Facebook
Some providers of digital services give their users the possibility to determine what should happen to their respective accounts after their death. For example, Google has an account inactivity manager.
Google users are free to set this up themselves. There, they can determine when the account should first be switched to inactive and then deleted in the event of inactivity and who may have access to their own data. This service is available for the Gmail email service, Google Photos and Google Drive, among others.
On Facebook, in addition to deleting the user account of a deceased person, it is also possible to create a “memorial state”. The account contents remain in this state. However, it is then no longer possible to log in to the account.
Family members and friends can request the activation of the memorial state via a form.
The account holder can determine what should happen to the account after his death, whether it should be placed in the memorial state or deleted. In addition, it is possible to specify an estate contact to manage the account in the “memorial state”.
Bitcoin and Other Cryptocurrencies
Assets in cryptocurrencies are also part of the digital estate. The cryptographic key (“the private key”) that grants access to the credit is inherited. However, it becomes problematic if the heirs do not have access to this key.
If, for example, the testator has not stored it anywhere, the heirs cannot access the credit balance. In this case, it is likely to be lost.
The private key can be stored on a physically embodied storage medium such as a USB stick which is then passed to the heirs as part of the estate. The same applies if the key is recorded in a written document.
It is also possible to create an online wallet. The private key is then stored on the servers of the wallet provider. In this case, the heir enters into the contractual relationship between the testator and the wallet provider and thus receives a claim to access the wallet.
It should be noted that assets consisting of cryptocurrencies are also subject to inheritance tax (§§ 1 para. 1 no. 1, 3 para. 1 ErbStG).
Therefore, they are treated the same way as other items for inheritance tax purposes. For the inheritance tax assessment, it is decisive whether the cryptocurrencies are held as private or business assets (§ 12 ErbStG).
The cut-off date for calculating inheritance tax is the testator’s death date (§§ 11, 9 para. 1 no. 1 ErbStG). For this purpose, the market value of the cryptocurrency applicable on the reference date must be determined.
If the cryptocurrency has a very high market value at that time, the inheritance tax is correspondingly higher. The inheritance tax can lead to a considerable burden if the price subsequently falls. However, such a consequence can be prevented by taking appropriate measures.
Provision for the Testator: How Can you Settle your Digital Estate?
Many people settle their estate by way of a will. However, the digital estate is often disregarded. However, a sufficient provision in this regard can be of enormous value.
It is advisable to ensure that the heirs are aware of and have access to all relevant content of the digital estate.
For this purpose, at best, an overview of all accounts with user names and passwords is created and kept in a safe place, such as a safe deposit box or bank safe deposit box. This overview should always be up-to-date.
During one’s lifetime, it should be determined how one’s accounts will be handled after death and which contracts will be terminated. Not to be forgotten are all the data stored on your end devices such as PC, smartphone, etc. In this regard, too, it should be determined what will happen to the data.
To ensure that your wishes regarding your digital estate are implemented, it is possible to appoint a trusted person as your digital executor.
Concerning cryptocurrencies, it should be ensured that the heirs have access to the corresponding cryptographic key to enable them to access the assets. Without access to the private key, the heirs are also denied access to the cryptographic assets.
The testator can determine how the digital estate will be handled in their testamentary disposition (will) and through a post-mortem power of attorney. For example, the access data to internet accounts can be deposited in the will. At the same time, it can be determined which persons may have access to the data.
For sufficient and effective estate planning, it is advisable to consult an experienced lawyer for inheritance law. This step can ensure that all aspects of your digital estate are carefully illuminated and considered.
Legal Advice from Brookes and Partners
If you require specialised legal advice in these matters from professionals, please do not hesitate to contact the legal team at Brookes and Partners PartG MbB. We are your reliable and competent partner for all questions regarding the digital estate in Germany.
Brooks and Partners is a multidisciplinary full-service law firm. With offices in Cologne, Aachen and Düsseldorf and conference rooms in Hamburg, Berlin, Stuttgart, Frankfurt and Munich, we operate nationwide and are always there for you.
Our lawyers advise you in German, English and other languages. Call us, send us an email or use our online form – we will be happy to give you an overview of your options as part of an initial assessment.
