Our digital asset inventories - electronic tools, digital
currencies, files, and various online accounts - continue to grow.
Five years ago, the McAfee Digital Assets Survey estimated that
Canadian consumers valued their digital assets at over $32,000 per
person, which is not an insignificant matter from an estate
administration perspective, and one which, as this post explains,
requires urgent attention from Canadian lawmakers.
Digital assets are different from tangible property that
traditionally comprises an estate. Aside from the practical hurdles
of transferring digital assets, such as the ability to locate and
access them, some digital assets, especially those stored on or
associated with online accounts, can also be subject to legal
hurdles.
A key issue is that user agreements that govern online accounts
are subject to privacy laws that can limit their owner's
ability to share access with third parties, including with the
executors of their estate. It is generally the privacy (and dispute
resolution) laws of the jurisdictions where the account providers
operate that will apply.
For instance, in the U.S., the federal Stored Communications
Act ("SCA"), which protects the privacy of digital
communications, has always given online account providers
discretion for disclosure where lawful consent of the owners of the
accounts is provided. Historically, however, there has been no
consensus with respect to what constitutes lawful consent
for this purpose and account providers have tended to err on the
side of caution, rather than risk privacy breaches. You may recall
the 2012 story of the late U.K. model Sahar Daftary, whose family
sought access to her Facebook account in a federal California court
with the hopes that it contained information about the cause of her
death. The court refused to order Facebook to provide such access.
Not every estate representative would have the financial resources
to seek legal remedies in other countries.
Even if user agreements were subject to the laws of Canada, we
currently do not have legislation that assists with access to
digital assets. The federal Personal Information Protection and Electronic
Documents Act may permit disclosure of certain personal
information stored online, however, this act does not compel online
providers to do so in an estate administration. Alberta's Estate Administration Act, the only
Canadian succession-related statute to make reference to online
accounts (in Canada, succession law, just like property law, is
under the jurisdiction of the provinces and territories), requires
the identification and determination of the full nature and value
associated with a deceased individual's online accounts for the
purpose of administration an estate, however, this statute has no
bearing on online account providers' provision of access to
such accounts.
An inability to access digital assets clearly hinders an
executor's ability to fulfil their duties to the beneficiaries
and to tax authorities, if the assets must be valued and reported
for tax purposes. This is a concern that estate practitioners have
been grappling with for a number of years. Some progress, however,
has begun.
In 2016, the Canadian Uniform Law Commission (an organization that
promotes uniform legislation in areas of provincial and territorial
law where national uniformity is beneficial) proposed a model
Uniform Access to Digital Assets by Fiduciaries
Act (2016) ("UADAFA") which, if adopted, would
authorize fiduciaries - i.e. attorneys, guardians and estate
executors - to access digital assets where the terms of a will,
grant of probate, a court order or an express statement in a user
agreement, provides for such authority.
The UADAFA follows the U.S. Uniform Law Commission's
similar proposal in 2015 of the model Revised Uniform Fiduciary Access to Digital Assets
Act (2015) ("RUFADAA"), which is
expected to help codify the standards for consent for the purposes
of the federal SCA. The RUFADAA has been introduced by
more than forty of the American states, whereas the UADAFA
has yet to proceed to the legislature of any Canadian
province.
Although the model UADAFA leaves unanswered concerns for
Canada, it is a stepping stone towards a legal regime for digital
asset succession. Until this regime is in place, however, and
seeing how the key obstacles revolve around privacy and the
question of lawful consent, it is important that we turn our minds
to this matter and set out in our wills and power of attorney
documents broad authority to our fiduciaries for dealing with our
digital assets. It may also be helpful to keep an inventory of
digital assets and to investigate which online account providers
allow their users to designate a beneficiary on death, and, if
appropriate, to make such designations.
Because the law has not yet caught up with the modern realities,
when it comes to digital assets, staying ahead of the game is
crucial.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
