In estate planning, it’s vital to address digital assets. Learn to itemise them in your will for a comprehensive digital legacy.
People’s lives are increasingly intertwined with technology. From social media profiles to cryptocurrency holdings, our digital footprint is expanding rapidly. As such, it’s becoming crucial to consider these digital assets in our estate planning.
This article will cover the importance of accounting for digital assets in your will, how to properly itemise them, and why they are an integral part of your digital legacy, with a focus on estate planning in Australia.
Evolution of Estate Planning
Estate planning, once a relatively straightforward process, has evolved significantly over the years. Traditionally, it involved tangible assets like property, cash, and personal belongings. However, the rapid advancement of technology has given rise to a new category of assets: digital assets.
Digital assets include but are not limited to the following.
Social Media Accounts
Your Facebook, Twitter, and Instagram profiles, among others, hold not just memories but also potential financial value through sponsored content or followers, if those websites engaged you as a partner account.
Online Banking and Investments
Access to online bank accounts, investment portfolios, and cryptocurrency holdings will be critical to ensure a beneficiary can still make use of them after you pass away. An estate solicitor may advise you that if the bank accounts are to be accounted for in your assets, you must ensure to cover the money within as some may ask that even if the account exists, it can raise questions to whether there’s still money in there or it may have been cleaned out.
Digital Media
E-books, music libraries, and movie collections stored in digital format. This is important considering recent trends in pop culture content have shifted from producing them for physical media to digital.
Email Accounts
Important correspondence, financial statements, and even subscriptions tied to your email addresses. Preserving access and the materials in the emails are very critical in light of deletion protocols by Yahoo! and Google due to long periods of inactivity in the emails – Google in particular, started closing Google Accounts inactive for over two years on 1 December 2023.
For example, one user who has operated a special email address for personal projects, which he logged in a few weeks ago after so many years. After verification, he discovered that the email provider shut down their address in the interim – wiping out correspondences and notifications dating back over 20 years.
Websites and Domains
Ownership and management of websites, blogs, and domain names. It is possible that their providers will close down the sites due to nonpayment of hosting costs.
Cryptocurrencies
Bitcoin, Ethereum, and other cryptocurrencies stored in digital wallets are marked by the ATO for Capital Gains Tax (CGT). Depending on the disposition, appointed estate executors may be asked to have those assets sold off and converted into Australian dollars.
Digital Businesses
If you own or have equity in a digital business, ensuring its continuity is vital.
Preserving Your Digital Legacy
With this ever-expanding list of digital assets, the need to account for them in your estate planning becomes evident. Here’s why:
Monetary Value
Many digital assets have tangible monetary value. Cryptocurrencies, for instance, can amount to substantial wealth. Your will can ensure that these assets are inherited by your chosen beneficiaries.
Privacy Concerns
Failing to plan for your digital assets can trigger privacy concerns. Unauthorised access to your emails, social media profiles, or personal files could have unintended consequences.
Asset Management
If you own digital businesses, websites, or domains, a well-thought-out plan in your will can help manage their transfer or continuation seamlessly.
Emotional Value
Your digital assets might hold sentimental value for your loved ones. Family photos, personal blogs, or cherished playlists can be a source of comfort after you’re gone. Social media providers such as Facebook have prepared for this contingency by allowing users to nominate legacy contacts and have their own profiles be converted into a Memorial page when they pass away.
Creating a Digital Asset Inventory
Now that we understand the importance of including digital assets in estate planning, let’s discuss how to properly itemise them. This process involves creating a digital asset inventory, which can be divided into three key steps:
Identify Your Digital Assets
Starting assembling a comprehensive list of all your digital assets. This may require thorough exploration of your online presence. Start with the following:
- Financial Accounts: Bank accounts, investment platforms, and cryptocurrency wallets.
- Social Media: Facebook, Twitter, LinkedIn, Instagram, and any other profiles.
- Email Accounts: Personal and professional email addresses.
- Digital Media: E-books, music libraries, movie collections, and any other digital files.
- Websites and Domains: List the URLs, hosting accounts, and domain registrar information.
- Online Subscriptions: Streaming services, online courses, and other subscriptions.
- Digital Businesses: If applicable, detail your involvement, ownership, and instructions for their future.
Access and Authentication
For each digital asset, record the necessary access and authentication details. These should include:
- Usernames and Passwords: Ensure these are up to date and secure. A secure password manager can be used to compile all access codes.
- Two-Factor Authentication (2FA): Note if 2FA is enabled and how to access backup codes.
- Recovery Information: Include any recovery email addresses or phone numbers linked to your accounts.
Document Your Wishes
Clearly articulate your wishes for each digital asset. This should involve specifying who should inherit or manage these assets and any particular instructions or restrictions.
Updating Your Will
Creating a will requires periodic updates – as your digital footprint evolves, so should your will. Review your digital asset inventory and make necessary changes whenever you open new accounts, change passwords, or acquire new assets.
In some cases where there are assets that only you have access to, they may need safeguards on who can access be passed down to after death. This was made evident when QuadrigaCX owner Gerald Cotten passed away unexpectedly in early 2018, but only he knew the access codes to the crypto exchange’s crypto vaults worth an estimated US$135m at a time when the company had some stock fluctuations and filed for bankruptcy. Estate administrators EY were able to recover US$34.2m in assets and prepare distribution of funds to beleaguered investors.
Estate planning can be complex, especially when digital assets are involved. Australia’s inheritance laws, at present, do not have provisions for digital asset accounting, and only the NSW Law Reform Commission’s digital access scheme discussion paper from December 2019 has been the farthest of any thoughts on the matter.
It’s advisable to consult with Australian estate solicitors who are well-versed in digital estate planning laws and regulations. They can provide valuable insights and ensure your will complies with legal requirements, especially since those digital assets will also still be under a provider’s remit and bound by existing service contracts.
Conclusion
In our increasingly digital world, accounting for digital assets in your estate planning is no longer an option; it’s a necessity. By doing so, you preserve your digital legacy, protect your assets, and ease the burden on your loved ones during an already challenging time.
You can ensure a smoother transition of both your tangible and digital wealth to your chosen heirs, leaving a lasting legacy for generations to come.
DISCLAIMER: This article is for informational purposes only and is not meant to constitute official legal advice. 2 Ezi has no relationships with any digital asset provider or estate law practice. Please consult your estate solicitor.
