Digital wealth after death: are you prepared?
The average Australian spends approximately five-point-seven hours on their phone every day.
During that time, we might:
- talk to each other online (WhatsApp: approximately 13 million active users)
- comment online (X (formerly known as Twitter): approximately 6 million users)
- share pictures (Facebook: approximately 19 million monthly users, Instagram: approximately 12 million monthly active users, Snapchat: approximately 6.4 million monthly active users)
- online date (Tinder: approximately 4 million users)
- business development (LinkedIn: approximately 6.5 million monthly active users)
- watch and create shortform videos (TikTok: approximately 5.5 million users).
With so much of our lives now digital – communication, business, shopping, banking, entertainment and earning – it’s no surprise that digital assets have become a crucial part of succession planning.
What is digital wealth?
Digital wealth generally refers to the intangible assets accessed or stored electronically.
Digital accounts include platforms such as social media, email, online banking, gaming, subscription services and cloud storage. These accounts do not possess value, but rather allow uses to access and manage digital assets like:
- intellectual property
- domain names
- code
- cryptocurrency and shares
- digital photos, eBooks and music
- online businesses
- NFTs,
- documents and health records
- personal financial,
- content stored on government department systems.
Importantly, your digital wealth may be held subject to the laws of a specific country or state, even if you do not live there.
Why it matters in succession planning
There is no specific legislation in Australia covering digital assets in succession and terms of service vary widely between platforms. Without clear planning, access to digital accounts and assets can be blocked – causing distress, disputes and financial loss.
A clear plan will help manage against:
- disruption to a digital business
- the potential for costly disputes
- exposing lawyers to claims from disappointed beneficiaries
- family division
- added stress for family members after
It is important that trusted relatives or friends have access to your digital wealth to retrieve sentimental photos, memories, or messages as well as securing private information which could pose a security risk allowing a criminal to use it for identify theft.
A cautionary tale
The sudden death of Gerald Cotton, founder and CEO of a multi-million-dollar Canadian cryptocurrency exchange start-up, QuadrigaCX, illustrates what can go wrong and highlights the importance of succession planning for your digital assets.
Cotton died holding the passwords to $275 million worth of coins and cash. His laptop, emails and messages were all heavily protected with encrypted passwords, and his widow was unable to retrieve the access despite extensive efforts. More than $200 million worth of the digital wealth and assets held for its customers remains uncoverable.
How to begin succession planning for digital wealth?
Some tips for addressing your digital wealth as part of your succession plan include:
- Storage: Determine where the digital wealth is stored (locally or in the cloud) to help decide whether to gift your device and/or account details.
- Inventory: Create a secure, up-to-date list of your digital assets and accounts – including login details, subscriptions (so they can be cancelled), passcodes and passwords. This shouldn’t be in your Will (which becomes a public document). Instead, store it in a safe location such as the traditional book of relevant information and passwords kept in a safe at home use a secure online password manager.
- Secure third parties: For valuable digital assets such as cryptocurrency, consider reputable third-party providers who can deal with secure storage of details and provide a stepped release of this information on death or incapacity to nominated persons.
- Update your Will and power of attorney: These documents should include clear definitions of digital assets and digital accounts and powers allowing your executors and attorneys to deal with them.
- Appoint a digital executor: If appropriate, name someone to manage your digital wealth upon your death.
- Review regularly: Keep your digital inventory and legal documents current as your assets and accounts change.
- Understand policies and terms of service: Ensure you understand the relevant policies and terms of service to determine what instructions you can validly give.
- Leave instructions: Provide clear instructions for your attorneys or executors regarding your wishes for how your digital assets are dealt with.
Examples of relevant policies and terms of service concerning death of the user:
- Facebook: Users can opt for their account to be memorialised or permanently deleted in advance. After death, the account cannot be changed unless the deceased added a legacy contact. Without a nominated legacy, accounts are typically memorialised.
- Instagram: Anyone can request for an account to be memorialised by providing proof of death. However, only immediate family can request removal (with proof).
- LinkedIn, TikTok and X: These platforms only allow profile removal or deactivation of profiles.
- iCloud: Accounts are non-transferable and any rights to your Apple ID or content within your account terminate upon notification of your death. You may wish to leave your login details with a personal representative, so they can log in to retrieve photos and other sensitive information. Without login details, your representatives may need a court order to access content – often difficult and expensive to obtain.
- Microsoft, Apple and Google: Accounts do not allow the removal of passcodes from phones or tablets without erasing all data on the device in the process. A family member or next of kin can submit a request to obtain data or funds from an account and close the account of a deceased user.
- PayPal: Only an account owner can close their account, unless they are deceased. Executors can close an account by submitting the required documentation.
Need help?
Digital wealth adds complexity to succession planning – but it doesn’t need to be overwhelming. Our national Private Clients team has extensive experience advising on succession planning matters relating to digital assets and wealth.
To ensure your plan reflects the realities of today’s digital life, please get in touch.
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