The Evolving Landscape of Digital Asset Succession

Woman at her desk with laptop and mobile phone representing the evolving landscape of digital succession in estate planning

The digital age has ushered in a paradigm shift in estate planning and administration, necessitating a re-evaluation of traditional succession practices. The proliferation of online accounts, digital content, and virtual currencies has created a new class of assets that present unique challenges for executors, beneficiaries, and the legal system. This article will delve deeper into the complexities of digital asset succession in Ontario, discussing the challenges faced, potential solutions, and the evolving legal landscape.

Understanding Digital Assets

Digital assets encompass a broad spectrum of online possessions, including:

  • Online accounts: Social media profiles, email accounts, online banking accounts, and streaming service subscriptions
  • Digital content: Photos, videos, documents, and music files
  • Virtual currencies: Bitcoin, Ethereum, and other cryptocurrencies
  • Gaming assets: In-game currency, characters, and items
  • Intellectual property: Patents, copyrights, and trademarks

These assets often hold significant sentimental or financial value, yet they are frequently overlooked or misunderstood in traditional estate administration.

The Challenges of Digital Asset Succession

Identification and Access

The first hurdle in digital asset succession is identifying and accessing a deceased person’s digital assets. This can be challenging due to the vast number of online accounts and the often complex passwords and security measures used to protect them. Executors may need to search through multiple devices, online platforms, and even physical documents to locate all of the deceased person’s digital assets. Additionally, accessing these assets can be difficult if the deceased person used strong passwords or multi-factor authentication.

Ownership and Control

Determining who owns and controls digital assets can be a source of contention. In some cases, ownership may need to be clarified, especially for assets created or acquired during a relationship. For example, if a couple makes a joint social media account, it may be unclear who owns the account and its content after one of the partners dies. Similarly, if a deceased person purchased digital assets using funds from a joint bank account, it may be unclear whether the assets belong to the deceased person or the surviving partner.

Privacy and Security

Privacy concerns are paramount when dealing with digital assets. Executors must navigate privacy laws and security protocols to access and manage these accounts without compromising the deceased person’s personal information. This can be particularly challenging for social media accounts, which often contain sensitive personal information. Executors may need to obtain court orders or follow specific procedures to access these accounts, and they must be careful to protect the deceased person’s privacy while doing so.

Valuation

Valuing digital assets can be difficult, as their worth may fluctuate rapidly and depend on market trends, demand, and the asset’s specific characteristics. For example, the value of cryptocurrency can fluctuate significantly over time, making it difficult to determine its fair market value at the time of the deceased person’s death. Additionally, some digital assets, such as in-game items, may have no intrinsic value but may be valuable to other players.

Legal Framework

The legal framework for digital asset succession is still evolving. While some jurisdictions have begun to address these issues, there is a lack of clear and consistent laws governing digital asset ownership, transfer, and inheritance. This can create uncertainty for executors and beneficiaries and make resolving disputes difficult.

Legislation Relevant to Digital Asset Succession

While there is no specific Canadian legislation addressing digital asset succession, several existing laws, including those set out below, may be relevant.

Succession Law Reform Act

The Succession Law Reform Act governs the distribution of estates in Ontario. It provides rules for the appointment of executors, the administration of estates, and the distribution of assets. When dealing with digital assets, executors must consider the provisions of this Act to ensure that the deceased person’s wishes are carried out and that the assets are distributed according to law.

Personal Property Security Act

The Personal Property Security Act governs the creation, registration, and enforcement of security interests in personal property. It may be relevant to digital assets that are considered personal property. For example, if a deceased person has secured a loan using their digital assets as collateral, the Personal Property Security Act will apply to determine the lender’s rights and the deceased person’s estate.

Privacy Legislation

Several federal and provincial laws govern the collection, use, and disclosure of personal information, including Canada’s Personal Information Protection and Electronic Documents Act (PIPEDA) and Ontario’s Freedom of Information and Protection of Privacy Act (FIPPA). These laws may be relevant to accessing and managing digital assets containing personal information. Executors must ensure they comply with privacy laws when accessing and managing digital assets, such as social media or email accounts.

Copyright Act

The Copyright Act governs the creation, ownership, and use of copyrighted works. It may be relevant to digital assets protected by copyright, such as photos, videos, and music files. Executors must consider the provisions of the Copyright Act when dealing with digital assets protected by copyright. For example, if a deceased person has created a copyrighted work stored on a digital device, the executor must ensure that the copyright is properly protected and that the work is not infringed upon.

Canadian Case Law and Digital Assets

While no specific Canadian legislation addresses digital asset succession, the courts have begun to grapple with these issues through case law. Canadian courts have generally applied existing legal principles to digital assets, such as the principles of property law and contract law. For example, courts have considered whether digital assets are personal property and whether they can be transferred by will or intestacy.

In recent years, Canadian courts have heard several cases involving digital assets, which have provided valuable insights into the legal principles that apply to these assets. For example, courts have held that digital assets can be considered personal property and transferred by will or intestacy. In addition, courts have considered the issue of ownership of digital assets, particularly in the context of joint accounts or assets created or acquired during a relationship.

Key Findings from Canadian Case Law

Digital assets are considered personal property

Canadian courts have consistently held that digital assets, such as cryptocurrency and in-game assets, are considered personal property. This means that they can be inherited by the deceased person’s beneficiaries. This is a significant development, providing legal certainty for individuals holding digital assets.

Ownership of digital assets can be complex

The ownership of digital assets can be complex, particularly in the context of joint accounts or assets created or acquired during a relationship. Courts have often applied principles of constructive trusts or resulting trusts to determine ownership. This means that the court will consider the parties’ intentions and the circumstances surrounding the creation or acquisition of the asset to determine who owns it.

Executors have a right to access digital assets

Executors have a right to access a deceased person’s digital assets, including social media accounts, email accounts, and online banking accounts. This right is subject to certain limitations, such as the need to protect the deceased person’s privacy. However, executors must often obtain court orders or follow specific procedures to access these accounts.

Best Practices for Estate Planning

Individuals should consider the following best practices to mitigate the challenges associated with digital asset succession.

  • Create a Digital Asset Inventory: Maintain a comprehensive list of all digital accounts and assets, including passwords, usernames, and security questions.
  • Update Your Will and Other Estate Planning Documents: Ensure that your will and other estate planning documents reflect your wishes regarding your digital assets.
  • Appoint a Digital Executor: Consider designating a trusted individual as your digital executor to handle your digital affairs after your death.
  • Consider a Digital Asset Trust: A digital asset trust can provide a framework for managing and distributing your digital assets.
  • Regularly Review and Update Your Digital Assets: As technology evolves, reviewing and updating your digital asset inventory and estate planning documents is essential.

The Future of Digital Asset Succession

As the digital landscape evolves, the legal framework for digital asset succession will likely undergo significant changes. New legislation may be enacted to address the specific challenges posed by these assets. In the meantime, testators should be aware of the potential risks and take proactive steps to protect their digital legacy, while executors should be mindful of the need to incorporate digital assets into the estate administration and probate process.

Eisen Law: Providing Innovative Estate Administration Advice in Toronto & Throughout Ontario

At Eisen Law, our skilled estate lawyers understand the estate administration challenges posed by the rise of digital assets. We help navigate the complexities of digital asset succession and take proactive steps to address these issues so the testator’s digital legacy is preserved. Our firm keeps current on this changing legal landscape so we can continue to give trusted advice to beneficiaries, executors, and trustees.

Eisen Law proudly serves clients in estates, trusts, and guardianship matters in Toronto and across Ontario. To schedule a confidential consultation, please call 416-591-9997 or reach out online.