Estate Planning for Digital Assets: Protecting Your Legacy in Australia

In this information age, we store a significant part of our lives online—our finances, memories, businesses, and entertainment. As a result, estate planning for digital assets has evolved from a niche concern to a vital aspect of modern estate planning in Australia. According to Statista, the number of Australian digital asset users is expected to reach 11.48 million by 2025. Additionally, News.com.au reported that the inclusion of cryptocurrency in Wills had doubled in 2024.

But have you ever considered what happens to these digital assets when you pass away? Without proper planning, your valuable online property could be lost forever or become inaccessible to your loved ones.

The Legal Challenges of Estate Planning for Digital Assets

Estate planning laws in Australia are outdated regarding digital assets. This creates several challenges:

Lack of Legal Framework

Australia does not yet have comprehensive legislation governing digital assets in estate planning. Executors may struggle to access online accounts, as service providers enforce strict terms of service agreements.

Restricted Access and Password Protection

Online accounts are typically protected by passwords, two-factor authentication, encryption, and biometric security. If not planned correctly, these security measures could permanently lock out executors.

Terms of Service Restrictions

Many platforms prohibit account sharing or transfer after death. For instance:

• Facebook allows a designated “Legacy Contact” but does not permit full access to an account.
• Google’s Inactive Account Manager enables users to specify data-sharing preferences.
• Apple’s Digital Legacy program allows limited data access.

Ownership vs. Licensing Issues

Some digital assets, like purchased music, movies, or e-books, are licensed rather than owned. This means they may not be transferable under a Will.

Without proper estate planning, digital assets risk becoming inaccessible, lost, or even legally disputed.

Estate Planning for Digital Assets: Cryptocurrency and NFTs

Cryptocurrency presents unique estate planning challenges. Unlike traditional bank accounts, crypto assets are stored in decentralised networks with no central authority to assist beneficiaries.

Key Considerations:

Private Keys and Wallet Security

• Cryptocurrency is stored in digital wallets that require private keys for access.
• If private keys are lost, the funds are permanently inaccessible.
• Secure storage options include hardware wallets, paper wallets, or encrypted digital storage.

Exchange Accounts and Access

• Some crypto is stored on exchanges (e.g., Binance, Coinbase), which may have policies for deceased account holders.
• Beneficiaries should be provided with clear instructions on how to access exchange accounts.

Legal Documentation and Instructions

• Wills should explicitly mention cryptocurrency holdings and provide clear instructions for access.
• However, since Wills become public records during probate, sensitive information (e.g., private keys) should be stored separately.

Use of a Digital Executor

• A knowledgeable digital executor should be appointed to handle cryptocurrency assets.
• This person should have a basic understanding of blockchain technology and security practices.

Smart Contracts and Automated Transfers

• Some cryptocurrencies allow for smart contracts that can automate asset transfers upon death.
• Setting up these contracts can help ensure assets reach intended beneficiaries without requiring human intervention.

Tax Implications

• The Australian Taxation Office (ATO) classifies cryptocurrency as an asset subject to Capital Gains Tax (CGT).
• Any transfer or sale of cryptocurrency may have tax consequences for the estate and beneficiaries.
• Keeping detailed transaction records is essential to ensure compliance with tax regulations.

Storage and Backup Measures

• A recovery plan should be in place in case of accidental loss of access credentials.
• This can include keeping duplicate copies of seed phrases in secure locations, such as:
  • A fireproof safe at home
  • A safety deposit box at a bank
  • Secure encrypted digital storage with restricted access
• It is also advisable to document instructions on how to use the recovery phrase correctly to avoid misinterpretation by beneficiaries or executors.
• Regularly updating and verifying the recovery process can prevent unexpected accessibility issues.

Proper estate planning for cryptocurrency ensures that digital wealth is preserved and can be accessed by beneficiaries without legal or technical complications.

Incorporating Digital Assets in Your Estate Plan

To ensure your digital assets are properly managed, follow these steps:

Create a Digital Asset Inventory

List all your digital assets, including:

• Account details (email, banking, social media, crypto wallets)
• Approximate value and importance
• Storage locations (device, cloud, exchange, external drive)
• Instructions on how to access and manage them

Securely Store Access Information

Since passwords and encryption keys are crucial, store them securely:

• Use a password manager with emergency access features
• Document recovery phrases for crypto wallets in a safe deposit box
• Never include passwords in a will, as it becomes a public document

 Appoint a Digital Executor

A digital executor is responsible for managing online accounts and assets after your death. They should:

• Have technical knowledge
• Be explicitly named in your will
• Follow your instructions for deleting, memorialising, or transferring assets

Update Your Estate Planning Documents

Ensure your legal documents include:

• Authorisation for executors to access digital assets
• Clear instructions on asset management
• Specific provisions for cryptocurrency and online businesses

Your Power of Attorney should also include digital asset access in case of incapacity.

Leverage Online Platform Tools

Many services allow users to set up legacy planning features:

• Facebook: Legacy Contact for memorialisation
• Google: Inactive Account Manager
• Apple: Digital Legacy access for trusted contacts
• PayPal: Deceased account handling procedures

These tools help executors access or manage accounts within legal constraints.

 Address Tax Implications

Digital assets can have significant tax consequences:

• Cryptocurrency holdings trigger CGT when sold or transferred
• Income-generating assets (e.g., monetised YouTube channels) may have ongoing tax obligations
• The ATO requires cryptocurrency transaction records for five years

A proper estate plan ensures compliance with tax regulations while protecting beneficiaries from unexpected liabilities.

Communicate Your Wishes

Discuss your digital estate plan with trusted family members and executors:

• Explain asset value and significance
• Clarify how each asset should be handled
• Provide access instructions for executors
• Update plans regularly as assets change

Estate Planning for Digital Assets: Common Pitfalls to Avoid

Even with a plan, common mistakes can cause problems:

Overlooking Hidden Assets: Digital assets aren’t limited to finances. Overlooked items include loyalty points, email backups, and personal blogs.

Assuming Family Has Automatic Access: Without explicit authorisation, loved ones may be locked out of essential accounts.

Poor Security Practices: Storing passwords insecurely can lead to hacking or identity theft.

Neglecting Business Continuity: For business owners, digital assets are essential for continuity. A failure to plan could disrupt business operations.

Forgetting to Update the Plan: Digital assets change frequently. Regular updates ensure accounts aren’t missed.

The Future of Digital Estate Planning in Australia

As digital ownership becomes more complex, estate laws will need to evolve. While Australia currently lacks specific legislation for digital estate planning, legal reforms are expected to address executor access rights and digital inheritance issues.

For now, individuals must take proactive steps to ensure their digital assets are properly managed. With careful planning, you can prevent future complications and protect your virtual legacy.

Secure Your Digital Legacy Today

Digital assets are just as important as physical ones in estate planning. By taking steps to create an inventory, appoint a digital executor, and secure access information, you ensure that your online legacy is managed according to your wishes.

Take the first step today. Talk to one of our seasoned Gold Coast and Brisbane Estate Planning Lawyers today for expert guidance in creating a solid digital estate plan that protects your loved ones from unnecessary stress and uncertainty.