TRUST & ESTATE SERVICES

Locked Out Without Your Help

Fact: When you die, your photos, videos and other important files could be permanently inaccessible to your family. You can avoid this by following a few simple steps.

04.25.2019 - Thomas E. Junkin, Senior Vice President, Personal Trust Services and Operations

Locked Out Without Your Help

By Thomas E. Junkin,
Senior Vice President,
Personal Trust Services

Imagine being locked out of your house, car or computer. Your stomach turns when you realize what’s happened. Then comes the welling feeling of frustration, even panic perhaps. It’s never fun. Unless something changes significantly, representatives, executors and beneficiaries may very well face similar feelings as they find themselves permanently locked out of digital assets.

We’re growing accumulators of digital assets, whether it’s a PayPal account, a music library or loyalty points. A recent study, for instance, says Canadians hold $16 billion worth of unused loyalty points and over half of us don’t know how many we own.1 The Bank of Canada suggests that between 2016 and 2017, the percentage of Canadians who own Bitcoin rose from 2.9% to 5%, and we now own an estimated 1.9 million Bitcoins.2 According to Deloitte Canada, by 2020, our typical reader will likely have electronically stored assets worth an estimated $50,000.3 Those figures don’t capture the emotional value of virtual photo collections held on sites such as Facebook, or the record of daily life reflected in our emails and tweets. 

It’s challenging to fathom things sitting, beyond reach forever, due to lack of direction or simply missing passwords. But, as estate planners, we know people are generally unaware of the estate planning issues raised by the surge in digital asset ownership. Very few people take steps to plan their digital legacy. It’s such a worldwide issue that the leading professional association, the Society of Trust and Estate Practitioners, has established a think tank called the Digital Assets Global Special Interest Group. Here’s why they believe addressing what comes next for digital assets, when you become incapacitated or die, is important.4

  • Financial Value: Consider your PayPal or Bitcoin accounts, online gaming accounts, loyalty programs and intellectual property. It can add up to a significant amount of money.
  • Sentimental Value: Think about the frustration and hard emotions your family may experience if they can’t access your online photo albums, personal contact lists, or email history.  
  • Privacy and Confidentiality: Keep in mind that if you want to maintain your privacy forever, someone needs to be able to destroy or restrict access to your private online information. 
  • Identity Theft: Consider that when you lose your mental capacity or die, the risk of identity theft increases greatly and preventive steps need to be taken.

Think of Your Executor
Our legal system has not kept pace with the digital asset trend. As illustrated by the adjacent graphic, a Canadian executor administering a deceased person’s digital assets will face at least four major hurdles.

Property laws

Alberta is currently the only province that explicitly includes digital assets in the definition of “property” for which an executor is responsible. Elsewhere, it’s unclear whether an executor has authority over digital assets. In fact, under Canadian criminal law, accessing someone’s online accounts without their permission could be a criminal act. To complicate matters further, today’s digital asset laws differ greatly between Canada and the United States. Since Canadians deal with many large US-based service providers (i.e., Apple, Google, Facebook, Microsoft), your executor will likely have to deal with a maze of US laws.

Privacy laws

Most online account custodians make protecting the privacy of their customers or third parties a top priority. They’re rightly worried about the legal risk of disclosing confidential information without express permission to do so. These privacy concerns frequently conflict with an executor’s legitimate need to gain access to the deceased’s online accounts.

Terms of service

Did you read the terms of service when signing up for Facebook, Gmail, iTunes or Netflix? Realistically, most people bypass these legally binding agreements and nearly no one checks to see what happens to their account when they die. Every service provider has different rules. Some agreements state all rights are cancelled upon death, while others provide limited ways for representatives to access data, sometimes within a limited time frame after death.

No instructions

Even the most diligent executor—experienced with terms of service agreements and having navigated conflicts between property laws and privacy laws of multiple jurisdictions—faces a huge hurdle if they don’t know the deceased person’s intentions for their digital assets. The executor has to make best guesses about whether to purge accounts to protect the deceased’s privacy, or attempt to download, review and keep data that might have value for the heirs, or assist in the orderly administration of the estate.

Solving the legal conundrum

In the United States today, after a long and complicated struggle, more than 40 states have adopted a version of the Revised Uniform Fiduciary Access to Digital Assets Act, created in 2015.

In Canada, the Uniform Law Conference of Canada passed the Uniform Access to Digital Assets by Fiduciaries Act in 2016. It’s a template only, and it’s up to each province to decide if they want to create their own version of the law. To date, no province in Canada has done so.

What Can You Do Today?
Until provincial legislators resolve the legal uncertainty around property laws, privacy laws and terms of service, there’s little one can do about three of the four barriers portrayed in our diagram. However, we can influence problems related to lack of planning or direction to executors and attorneys. Assuming you use digital media in fairly standard ways, we recommend:

  • Thinking about what’s to come next for your digital assets when planning for your death or incapacity.
  • Listing digital assets, along with your instructions, so your representative (if you die or become incapacitated) knows where to find them and has a clear picture of what needs to be done.
  • Appointing someone you trust as your digital estate representative. Seek legal advice if you want someone other than your executor or power of attorney to have this authority.
  • Making passwords available, or at least provide a secure way for your representative to recover or create new passwords. This typically means giving access to your main email account, as most service providers use email as the key to recovering passwords.
  • Ensuring your wishes can be carried out. Review the terms of service for the most important online services and, if necessary, update your will and power of attorney, to expressly authorize your representative to control your digital assets.
  • Considering digital assets when you’re asked to be an executor or representative. Before saying yes, gain some insight on the person’s digital world. If the decision is already made, discuss it with them so you’re aware long before you’re called on to perform such duties.

If you produce online content or own valuable digital assets such as large cryptocurrency balances, income-generating websites, software licences, etc., we recommend working with an expert estate planning lawyer to create a customized digital estate plan. This will help ensure your personal representatives and your family aren’t caught up in a fight to gain control of your digital assets.

In either situation, ensure your digital legacy is in order so your assets will be distributed according to your wishes, and nothing is left permanently locked in the digital world.


 

 

NOTES:

1. Julie Cazzin, “Canadians are sitting on $16 billion in unredeemed loyalty points,” Macleans, May 26, 2017, https://www.macleans.ca/economy/money-economy/canadians-are-sitting-on-16-billion-in-unredeemed-loyalty-points.
2. Christopher S. Henry, Kim P. Huynh and Gradon Nicholls, “Bitcoin Awareness and Usage in Canada: An Update,” Bank of Canada, Staff Analytical Note 2018-23, July 2018, https://www.bankofcanada.ca/wp-content/uploads/2018/07/san2018-23.pdf.
3. Luann Lasalle, “What to do about online accounts and assets after death,” The Globe and Mail, August 30, 2013, updated May 11, 2018, https://www.theglobeandmail.com/globe-investor/personal-finance/what-to-do-about-online-accounts-and-assets-after-death/article14024031.

4. “Digital Assets,” STEP Digital Assets Global Special Interest Group, https://www.step.org/sites/default/files/Digital_Assets/Digital_Assets_PUBLIC_GUIDE.pdf.

 

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Thomas E. Junkin, Senior Vice President, Personal Trust Services and Operations

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