The estate planning process needs to evolve beyond its present focus on physical assets as Australians increasingly conduct their lives online. Advising clients to ensure their digital assets can be found and accessed if they lose capacity is a good start. The definition of digital assets is broad and potentially takes in everything from social media, photos and music accounts to online banking, digital wallets and cryptocurrency.
The common thread is that the transfer of these assets via a Will or other estate planning process can be difficult as there are presently no laws directly addressing digital assets. While it is easy to see the value in a Bitcoin account worth thousands of dollars, the sentimental value of digital property and electronic communications such as digital photographs, videos and emails should not be discounted.
“The complexity of this area is that there is no specific legislation directly addressing digital assets,” says Anna Hacker, National Manager, Estate Planning at Australian Unity Trustees Legal Services. “This means that there is significant frustration, especially when it comes to a person passing away or losing capacity, for their next of kin to try to work out how to gain control and access. Each individual asset will have its own terms and conditions, which may vary greatly.”
Hacker says it is a common misconception that digital assets have no value. Digital wallets via services such as PayPal can have money stored on them, loyalty programs such as Coles or Woolworths rewards membership accounts can have significant financial worth, internet domain names can have value, and even the musings of bloggers can be a type of intellectual property.
“In estate planning we have always had to consider ‘speculative’ assets, particularly aspiring author’s unfinished novels. In a way, this is not dissimilar. The biggest issue we encounter though is ensuring that people actually know where the assets are held,” says Hacker, adding that this has extended to clients trawling through rubbish tips to locate a hard drive that was accidentally thrown away by an enthusiastic cleaner.
More broadly, this is clearly an area where estate planning experts, financial advisers and digital service providers can expect to encounter a lot more complexity until the legislation catches up with consumer behaviour.
“We will have to change our focus on the more physical assets and understand that there are many other critically important assets that people will want to pass on when they pass away,” Hacker says.
“I am aware of a situation in which the cost of dealing with the digital provider was going to outweigh the value of the asset and so the executor decided not to pursue it. We therefore recommend including a clause that specifically appoints the executor – or some other person, often clients prefer someone else to deal with their digital assets, especially social media accounts – as a digital executor.”
On issues specific to the transfer of cryptocurrency, Hacker says the biggest problem facing executors is not being able to define where they are located and therefore how they should be dealt with in the probate application process.
“There is a balance between writing records of the digital assets and providing too much information that could be used inappropriately if the wrong person accessed it,” she says.
“We recommend keeping records but not leaving all records together. Perhaps leave some in a password protected file, others in hard copy in a physical safe.”
In 2018, NSW became the first Australian jurisdiction to examine the issue of how to deal with digital assets. The NSW Law Reform Commission examined:
• The current laws affecting access to digital assets in NSW;
• The practices being used to overcome the legal impediments to access; and
• The recent innovative changes to the law in other jurisdictions to allow access to digital assets.
The Commission’s report recommended a new statutory scheme to ensure people with a legitimate interest can access a person’s digital assets when they pass away or are incapacitated, finding that current laws do not effectively ensure this.
Important: This article has been provided to Intuitive Financial Services by Commsec Adviser Services. It has been prepared without taking account of the objectives, financial or taxation situation or needs of any particular individual. Before acting on the information, you should consider its appropriateness to your circumstances and if necessary, seek appropriate professional advice. Any information used in this article is for illustrative purposes only. Anna Hacker is external and not a member of the Commonwealth Bank of Australia Group of Companies (the Group) and the content or any view expressed by Hacker does not represent an endorsement, recommendation, guarantee or advice in regard to any matter. CBA, nor members of the Group accept any liability for losses or damage arising from any reliance on external parties, their products, services and materials. Past performance is no guarantee of future performance.