The Modern Estate – How to Include Digital Assets in Your Will

In the ever-evolving digital landscape of the 21st century, your personal wealth doesn’t just include tangible assets like property or cash in the bank. These days, there is also the possibility that you’ve acquired a significant amount of digital assets over the years. From cryptocurrencies to social media accounts and from Non-Fungible Tokens (NFTs) to digital subscriptions, these digital assets often hold both monetary and sentimental value. But have you included them in your estate plan?

As a modern Australian expat, it’s crucial to understand the value of these assets and how they fit into your estate plan. In this week’s post, we will be exploring these assets and how they relate to your Estate Planning as an Australia.

Defining Digital Assets

So, what exactly are digital assets? In the broadest sense, digital assets include any online accounts or files stored in the cloud. That could be your Facebook account, your Instagram photos, or the emails in your Gmail inbox. It could also be your iTunes music library, your Dropbox files, or even your domain names.

For the financially savvy among you, digital assets also refer to cryptocurrencies like Bitcoin and Ethereum, and more recently, Non-Fungible Tokens (NFTs). As of 2022, 25.6% of Australians owned some form of cryptocurrency, a figure that’s likely grown given the increasing popularity and acceptance of these assets. For many, these crypto assets represent a significant portion of their wealth and, therefore, are an essential part of estate planning.

NFTs and Cryptocurrency in Estate Planning

Incorporating cryptocurrencies into your will isn’t as straightforward as it might seem. Firstly, cryptocurrencies are stored in digital wallets, accessed by private keys – a series of numbers and letters that, if lost, could mean permanent loss of the cryptocurrency. To ensure your crypto assets aren’t lost after your demise, it’s essential to provide a secure way for your heirs to access your private keys.

NFTs, a unique type of digital asset that represents ownership of a unique item or piece of content on the blockchain, have also been gaining popularity. They range from digital art to virtual real estate in digital worlds. If you own any NFTs, they too should be included in your estate plan, and similar to cryptocurrencies, access to these assets is typically controlled by private keys.

Estate Planning for Social Media Accounts

In this digital age, our social media accounts are like our virtual homes where we store memories, personal thoughts, and connections with friends and family. A 2021 survey by We Are Social and Hootsuite indicated that the average Australian has 9.3 social media accounts. Therefore, it’s essential to plan what should happen to these accounts after your death.

Some platforms like Facebook and Instagram allow you to nominate a ‘legacy contact’ who can manage your account once it’s memorialised. Others, like Twitter and LinkedIn, will deactivate an account upon receiving a report of the account holder’s death. Clearly documenting your wishes for each social media account and providing necessary information will help your loved ones carry out your wishes more effectively.

You may wish to provide your backup login details to enable your family members to quickly deactivate your social media accounts. It’s naturally important to exercise caution here and ensure security when providing any form of login information.

Digital Subscriptions in an Estate Plan

The boom of the digital age has brought a surge in digital subscriptions, from news sites like The New York Times to streaming platforms like Netflix and Spotify. Australian consumers spent $4,500 per household per year on digital subscriptions in 2022, a figure projected to grow at 11.4% annually. But what happens to these subscriptions when you pass away?

Some subscriptions may continue to charge until they are cancelled, potentially draining resources from your estate. Therefore, it’s important to leave instructions about these digital subscriptions in your estate plan to ensure they are cancelled or transferred as per your wishes. While it’s possible to instruct the bank to stop payments, this process can also take time.

Tax Implications of Digital Assets

In Australia, the Australian Taxation Office (ATO) treats cryptocurrencies like property for tax purposes, meaning capital gains tax applies for Australian tax residents. If you leave your cryptocurrencies to your heirs, they may be liable for capital gains tax when they sell or dispose of them.

The tax implications for other digital assets like NFTs are less clear as legislation struggles to keep pace with technology. As an Australian expat, it’s important to seek professional advice on this matter to avoid potential legal and tax pitfalls. It’s also important to consider where your potential beneficiaries are tax residents and ensure that this is factored into your estate planning.

Creating a Comprehensive Digital Estate Plan in Australia

As a professional Australian expat, taking the time to craft a comprehensive digital estate plan is an invaluable investment in your future and your legacy. It’s important to consider Australian laws when creating your estate plan, even if you currently reside overseas. This section delves deeper into the steps to creating an effective and comprehensive digital estate plan, from identifying your digital assets to selecting a digital executor and regularly updating your plan.

1. Identify Your Digital Assets

Start by creating a comprehensive list of all your digital assets. This might include but is not limited to:

• Cryptocurrencies and NFTs: Consider all the digital currencies you have, such as Bitcoin, Ethereum, and any NFTs you own. Consider physical and digital wallets that you may have.
• Social Media Accounts: This can include Facebook, Instagram, Twitter, LinkedIn, and more.
• Email Accounts: Don’t forget about your various email accounts with providers such as Gmail, Yahoo, or your work email.
• Online Banking and Financial Accounts: These might include PayPal, your online-only banking accounts, stock trading accounts, and more.
• Digital Subscriptions: Streaming services, digital newspapers, cloud storage accounts, and other recurring subscriptions.
• Digital Content: Websites you own, blogs, uploaded videos, and photos.
• Any other online accounts that require a username and password, like eBay, Amazon, or digital stores.

Remember, this isn’t just about the monetary value. Your email accounts, for example, may hold important records and correspondence. Your social media might contain precious memories and connections.

2. Document Access Information

For each digital asset, document how to access it. This will typically be a username and password, but for assets like cryptocurrency, it may include information about your digital wallet and private keys. Store this information securely and make sure it is accessible to your chosen executor when the time comes.

3. Detail Your Wishes

Decide what you want to happen to each digital asset after your death and document your wishes. Do you want your social media profiles to be deleted, or do you want them to remain as a sort of digital memorial? Should your digital subscriptions be cancelled, or transferred to someone else? Would you like your cryptocurrencies to be sold and the proceeds divided among your heirs, or should the digital assets themselves be included in your estate?

4. Choose a Digital Executor

Choose someone you trust to be your digital executor. This could be the same person as your traditional executor, or it could be someone else. This person will be responsible for carrying out your wishes for your digital assets. Be sure to discuss your plans with your chosen executor and ensure they are willing and able to take on this role.

5. Legal Considerations

In Australia, legislation is catching up to the realities of digital assets. The status of digital assets after death can vary greatly depending on the platform and the type of asset. It is vital to consult with a professional who is familiar with both Australian law and the landscape of digital assets to ensure your wishes are executed legally and smoothly.

6. Regularly Update Your Plan

The digital world is constantly changing and evolving. You may acquire new digital assets, legislation may change, or you may simply change your mind about what you want to happen to your assets. Regularly reviewing and updating your digital estate plan ensures it remains accurate and relevant.

7. Seek Professional Assistance

Creating a comprehensive digital estate plan can be a complex process. It can be helpful to seek assistance from an estate planning professional with experience in digital assets. They can help guide you through the process and ensure your estate plan complies with the current laws and best practices.

Conclusion

Your digital footprint is larger than you think. From cryptocurrency investments to your Facebook account, your digital assets have value and should be considered in your estate plan. As an Australian expat, it’s crucial to consult with a financial planner to ensure your digital assets are appropriately included in your estate plan. Planning for the future can be complex, but by considering all aspects of your assets – both physical and digital – you’ll be well-prepared for whatever comes next.

Navigating the world of digital estate planning may be a complex journey, but it’s an essential one for every modern individual. Your digital assets are a part of your legacy, just as valuable and personal as your physical belongings. By including them in your estate plan, you’re ensuring your legacy is fully represented and protected, no matter what form it takes.

Ally Wealth Management is the trusted ally in finance for Australians at home and across the globe. As both Australian expats and residents, the founders of Ally have a unique understanding of the common personal financial challenges faced.

Book your complimentary appointment with our team at Ally Wealth Management to discuss how we can help you to achieve your financial goals.

Ally Wealth Management Pty Ltd is a Corporate Authorised Representative of Sentry Advice Pty Ltd ABN 77 103 642 888. Sentry Advice holds an Australian Financial Services Licence (AFSL) No. 227 748.

General Advice Warning: The information contained herein is of a general nature only and does not constitute personal advice. You should not act on any recommendation without considering your personal needs, circumstances, and objectives. We recommend you obtain professional financial advice specific to your circumstances.