NFTs or non-fungible assets have become the latest buzzword in the new age of digital assets. NFTs are similar to cryptocurrency, but rather than recording ‘transactions’ (e.g. an amount of a cryptocurrency moving from one ‘wallet’ to another) they record ownership. An NFT is not physical or tangible, rather it is a record of digital content that can be saved and stored in the digital sphere. NFTs are a fast-growing subset of the cryptocurrency and digital assets universe and can be the original digital version of almost anything, including: a GIF, a painting, a song, or even a meme. A digital image is assigned a unique string of numbers, allowing collectors to distinguish between the “original” and any copies. A buyer of an NFT receives a certificate secured in the block chain technology, which authenticates them as the owner of that NFT.
Examples of popular NFTs
The market for NFTs is rapidly expanding, with musicians, artists and video editors all selling their digital assets in return for substantial sums. For example, In March 2021, Twitter CEO Jack Dorsey put his first-ever tweet up for auction and received an astonishing bid of $2.5 million.
Recently, NFTs have made a big impact in the fine arts sector. In 2018, a crypto-art-friendly gallery, Dadiani Syndicate in London and its tech partner, Maecenas, auctioned 31% of a Warhol painting, raising $1.7 million in the sale. The block chain art auction was run entirely on Ethereum using smart contract technology. Buyers were able to purchase fractions of the Warhol painting with bitcoin (BTC), ether (ETH), or ART coins. A piece of ownership of the painting was digitally fragmented into unique identifiers that could be purchased and owned.
As people begin to add NFTs to their collection of assets, what does it mean for estate planning and legacies?
Charities are often left monetary and/or property gifts in wills. However, legacy can now include digital assets such as NFTs and their proceeds.
Owners of digital assets should discuss with their solicitor who they wish to receive their assets on their death. It is important to ensure that the executors of a will are provided with the appropriate details to access and transfer digital assets upon death.
We currently have a situation where the legacy infrastructure needed to support this fast moving shift is not keeping pace. People are moving their assets online, but not considering the long-term consequences.
Legacy teams should begin to have a strategic approach on advising people who may wish to gift them digital assets. Those charities also need to have procedures in place on how to deal with NFTs when they do have access.
Digital assets as legacies are not just for the future, they are the “here and now” and planning ahead to ensure their smooth succession is critical.
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Andrew acts for individuals and charities in resolving disputes regarding wills, trusts, estates and powers of attorney.