Creating a Digital Estate Plan

It has been estimated that approximately 20% of all Bitcoin cryptocurrency has been lost due to the inability to access those assets.  Do a quick Internet search of Matthew Mellon, banking heir who died suddenly in 2018, for an interesting read on how his estimated $500 million in XRP digital currency halted the administration of his estate for years, with that wealth almost being lost completely because he had not shared his keys to those assets before he died.

Protecting the digital inheritance you wish to pass on to future generations is not a simple task, but an integral part of your efforts should be to create a digital estate plan so that your Fiduciary (executor, estate trustee, administrator, attorney acting under Power of Attorney, trustee under a trust, court-appointed committee, or guardian of property) can have some ability to access those assets in the event of your death or mental incapacity.

Digital assets have been defined as any “record that is created, recorded, transmitted or stored in digital or other intangible form by electronic, magnetic or optical means or by any other similar means” — everything from email to loyalty points to cryptocurrency to intellectual property to the devices by which you access those assets.

Most Canadians have spent a lot of time and effort accumulating digital assets, both personally and in business. The next step is to try to preserve those assets by creating a digital estate plan so that your appointed person can access those assets and carry out your wishes once you are unable to do so.

Your primary obstacle will soon surface:  Terms of Service Agreements – to which each user agrees when opening an account but which virtually no user ever reads.  Given the gap in legislation in Canada, the US, and most other jurisdictions to allow access to such information and assets by a person’s Fiduciary, what happens to your digital assets is currently dictated in large part by the terms of service agreements a user holds with each service provider.  To add to the frustration is that each service provider has its own terms of service agreement that will govern, among other things, what can and cannot be done with your digital assets upon your death or incapacity, including whether those assets and related information can be transferred to another party, changed, deleted or even accessed in the first place. And, of course, those terms are subject to change at any time. A user is challenged to  know what their overall rights are at any given moment.

A key focus of the service providers is the protection of a user’s private information once the user is no longer able to control that information themselves.  That protection contradicts the legal requirements of basic estate administration and power of attorney obligations to gather and administer those assets once the user has lost capacity or passed away. Service providers also most likely do not want to be burdened with the administrative costs of replying to individual requests from each user’s Fiduciary.

As of the date that the previous article in this series (https://perlaw.ca/2022/11/10/what-will-happen-to-your-digital-assets-upon-your-death-or-incapacity/) was posted, the only Canadian jurisdictions having legislation allowing someone to access another person’s digital asset information were Saskatchewan and Prince Edward Island. Since that time, New Brunswick has passed its Fiduciaries Access to Digital Assets Act, which received Royal Assent on December 16, 2022, and notably contains provisions  similar to the Acts in place in Saskatchewan and PEI.  Contrary to Saskatchewan’s legislation, however, New Brunswick opted to follow suit with PEI’s Access to Digital Assets Act in terms of validating provisions in a service agreement that restrict subsequent access to same as long as the user indicates their consent to those restrictive provisions by a “separate affirmative act”, such as clicking on the applicable icon on the service provider’s website when opening the account.

In the meantime, while we wait for the law to catch up to technology, you or your clients need to take active steps while you are alive and well, to plan for such assets upon your death or possible loss of mental capacity. Such plans can be included in a Will and Power of Attorney, or in a separate stand-alone document.  Steps may also need to be taken on the digital account custodian’s website itself. You are well advised to review the service agreement of each service provider where you hold an online account, loyalty points or other digital assets of any sort to become familiar with their requirements and policies with respect to those assets in the event of death or incapacity. I will touch on the current requirements of some of the more common providers in a later article in this series.

Steps to Create a Digital Estate Plan

1. Create a list of your digital property, including:

• Computers, smart phones, tablets, external hard drives
• Online accounts including banking, email, shopping, rewards and utility accounts
• Business digital assets should be listed separate from personally held assets
• Document all personal Web Domain Names including any personal blogs, websites and social media accounts
• List any intellectual property you may have developed or pending applications including copyright, trademarks or patents

2. Provide a means to access your physical devices and accounts stored online or in the Cloud:

• Make a record of passwords and usernames needed to access your physical devices and online accounts
• Document location of your private keys to access digital currency held in digital wallet
• Store password and username information in a secure but accessible location
• Remember personal music storage and passwords for apps such as Apple iTunes
• Consider using password management software such as LastPass, Keeper, Password Boss; and inquire about companies offering digital asset management such as Everplans, LifeSite, LegacyShield or Directive Communication Services.[1]

3. Decide what you want to happen to those assets upon your death or incapacity:

• Create detailed instructions on how your digital executor should deal with each asset
• Should they be archived and saved?
• Deleted or erased?
• Transferred to family members, friends or others, if they are in fact transferable?
• Should revenue-generating digital accounts be transferred to someone who can continue on with your blog, social media account or other online presence to continue the income flow to your family?

4. Appoint someone to act as your digital executor:

• Can be done as part of your Will
• Does not replace a traditional executor under your Will, but acts as supplement
• May wish to name someone who is perhaps more technologically savvy than your executor to assist them in matters regarding your digital assets
• Similar considerations as for naming traditional executor – do you trust them; are they equipped to handle the task; will they have the time to devote to it; are they good with details, paperwork and are they financially responsible and adept?

5. Properly document your intentions:

• Appoint a Fiduciary in a properly drafted Power of Attorney and Will, including powers to access and manage your digital assets upon your death or mental incapacity.
• Review websites of social media account custodians to see if a legacy contact or trusted contact (or similar) can be named while you are alive to access and control your accounts upon death or incapacity (ex. Facebook, Google, Microsoft, Twitter).
• Ensure Fiduciary will be able to find your list of digital assets and related passwords including any master list(s) of your passwords (ex. let them know if you are using software for this purpose). Consider providing copy to them while you are still alive.
• Update your lists, intentions and documents regularly.

Always keep in mind that your Fiduciary’s right to access your digital assets will be subject to any instructions given in your Will or POA. So if there are assets you do not want the Fiduciary (or your family) to access, you should specify those instructions or include a term in your Will and/or POA specifically precluding them from having such access.

Be aware that, even with a digital estate plan, the terms of service agreements of the various digital account providers may prevent the Fiduciary from accessing your digital assets, and may restrict the ability to transfer those assets to a beneficiary.  In some cases the assets may be “shared” with a family member (ex. digital music accounts) but not actually transferred to them. In spite of these roadblocks, creating a digital estate plan at least gives your Fiduciary a starting chance.  Never share your passwords with anyone other than your Fiduciary as you may be in breach of the service agreements. If you are not the appointed Fiduciary of another party, never access their online accounts by simply using their password even if you happen to know it, as you will most likely be in breach of the service provider’s terms since you are not the actual authorized user.

[1] Note: These platforms or programs are examples only and no advice or recommendation is hereby given with respect to any of them.