Why you should keep track of your most critical digital assets

Digital wealth: How to have the final say about your online assets when you die

Click here to view original web page at www.afr.com
More than eight in 10 Australians are not discussing what should happen to their digital accounts.
More than eight in 10 Australians are not discussing what should happen to their digital accounts.

by James Whiley

"Digital wealth" constitutes a far greater proportion of our estates than many realise, with our personal and business lives becoming increasingly digitalised and online.

Yet a survey for the NSW Trustee and Guardian found 83 per cent of Australians have not discussed what will happen to their social media accounts when they die and only 3 per cent of Australians with a will have given directions regarding their social media accounts.

Digital wealth needs to be included in estate and succession planning, so that on death or incapacity assets are protected and this wealth is dealt with tax effectively.

Even if you do not own an online or virtual business, this digital wealth may have the ability to produce income or be sold, but will be of no value if nobody knows it exists. Not to mention potential sentimental value where the account includes photos, memories or messages.

Its expanding net covers: online or virtual businesses, which may own goodwill or intellectual property including copyrighted materials, trademarks and code; social networks including Facebook, Instagram or LinkedIn; email accounts; blogs and domain names; music, photos and files stored online or in clouds; online accounts such as PayPal; access to financial accounts and cryptocurrencies; and hardware including computers and tablets.

Complications may arise on death due to differing account terms and differing international laws.

For example: you want to gift videos or photographs in your Will, but it depends where they are stored: if saved on a digital device such as your iPad, you can simply gift the device; if saved in the cloud, the provider's account terms determine what happens to them.

Digital rights differ greatly from one provider to the other:

  • Facebook accounts can be memorialised or permanently deleted. Content cannot be changed unless the deceased added a legacy contact. If an option is not chosen, Facebook's standard policy is to memorialise the account.
  • Instagram accounts can be memorialised, but accounts can only be removed by family members who prove they are an immediate family member. LinkedIn only offers profile removal, deleting connections, recommendations and endorsements.
  • iCloud accounts are non-transferable and rights to your Apple ID or content terminate upon death. You may leave login details for loved ones to retrieve photos and other sensitive information. If not, a court order may be required, which will prove difficult and expensive.

Australia has no specific legislation yet for digital estate and succession planning or managing digital wealth. Families have no clear rights to access a deceased or incapacitated family member's digital assets and accounts.

Without password and login details these assets can remain locked away or online indefinitely. Even with a password you may be in breach of the service provider's terms when using that information.

There is no easy answer, but the following is currently considered best practice:

  • Traditional estate and succession planning, which also covers digital wealth. This involves reviewing asset ownership and structures, proposing solutions to problems, and seeking buy-in from beneficiaries to lessen disputes later due to beneficiaries not understanding what was done and why.
  • Share a list or secure location of digital accounts and wealth with trusted family members, kept securely and separate from passwords to avoid security breaches. It should not be included in the will, as the will becomes a public document if and when probate is granted.
  • A letter of wishes may provide direction. This letter could cover: accounts to be closed, deleted and/or content erased; material to be downloaded and gifted to named individuals; accounts to be archived and saved; credits, points or cash values to be redeemed and transferred to particular people; and online businesses to be shut down.
  • Incapacity needs to be considered, as dealing with digital wealth and social media accounts may be more urgent than on death. Account policies are often less clear on incapacity. Enduring powers of attorney should define digital assets and digital accounts, and include powers allowing the attorney to deal with them. While the power of attorney's jurisdiction only covers Australia, it may make an account provider in a different jurisdiction more likely to accept the attorney's authority.
  • Wills should define digital assets, digital accounts and include powers for executors and trustees to deal with them.If there is significant digital wealth in other jurisdictions consider local wills and the equivalent of enduring powers of attorney in each jurisdiction, with a global Australian will covering the worldwide estate other than that situated in these jurisdictions. This may not be strictly legally required, but can facilitate the process and possibly lead to a better tax outcome.

With significant digital wealth an option could be to hold it through a trust structure separate to your estate for improved tax and asset protection outcomes. Your will must deal with who the shares in a trustee company (if there is one) should pass to and you also need to deal with succession to the office of the appointor of the trust (if there is one).

Regular reviews at least every three years, and when there is a significant change in circumstances, are important given how quickly the digital arena is changing.

James Whiley is a special counsel in the Hall & Wilcox private clients practice www.hallandwilcox.com.au

AFR Contributor


Main curator on Digitaldeathguide. Supported by a bot. Some articles may need to be weeded, don't hesitate to tell me !