There is no disputing that most Canadians have an online presence. According to a recent Statistics Canada survey, 92% of Canadians used the internet in 2020 and 71% used social networking sites to communicate and share content.

Many Canadians are also storing their personal information and records on online platforms, such as Apple and Google, and social media platforms, like Facebook and Instagram. Typically, individuals who create online accounts must enter service agreements in order to store their information and records digitally, with the result that online entities are now playing the role of virtual custodians, holding digital records and personal information on behalf of their account holders.

The problem with this situation is that if an account holder passes away or loses capacity, their legal representatives may not be able to access their digital assets* held by a virtual custodian. In Ontario, there is no legislation that expressly authorizes fiduciaries, such as estate trustees and substitute decision-makers, to access digital assets. Focusing specifically on wills and estates, a virtual custodian may not recognize a certificate of appointment of estate trustee as authorizing access to a deceased account holder’s digital assets, notwithstanding that trustee’s legal authority. Virtual custodians often limit access to digital assets in accordance with the terms of the service agreement that the account holder entered into in order to use the online platform, making it potentially necessary for fiduciaries to resort to litigation to obtain access to a deceased or incapable account holder’s digital assets.

This problem is the focus of the latest report published by the Alberta Law Reform Institute earlier this year, entitled Access to Digital Assets. In it, the Institute recommends implementing legislation that would make it easier for fiduciaries to access account holder’s digital assets after death or incapacity by overriding restrictive service agreements. The recommended legislative scheme essentially modifies the Uniform Access to Digital Assets Act, which was prepared by the Uniform Law Conference of Canada (the “ULCC”) in 2016. As noted in the Introduction of the Institute’s Report:

“… it is important to recognize that eight years have passed since the ULCC adopted the Uniform Act in 2016. The digital landscape is changing and it is difficult for legislation to keep up in real time. While the Uniform Act does an admirable job in trying to address this ever-changing environment – for example, by including a broad and adaptable definition of digital assets – there may be some need to revise certain provisions of the Uniform Act based on more recent developments.”

Other jurisdictions in Canada have already passed legislation based on the ULCC’s model legislation, including Saskatchewan, Prince Edward Island, New Brunswick, and the Yukon. To learn more about the legislation in these provinces, see Ian’s blog post from earlier this year, Yukon enacts legislation giving fiduciaries access to digital assets.

Under the proposed legislative scheme, fiduciaries would be authorized to handle digital assets, regardless of the terms of the service agreement signed by the account holder, meaning virtual custodians would be required to provide access to digital assets upon receiving legal documentation confirming the fiduciary’s authority. The Institute contemplates a variety of legal instruments being used to authorize fiduciaries, including wills, powers of attorney, personal directives and trust documents. Fiduciaries would also be permitted to apply to the court for advice and directions regarding their right to access digital assets. The Institute also recommends recognizing six categories of fiduciaries, including:

• personal representatives of an estate;
• attorneys appointed through a power of attorney;
• guardians appointed to assist dependent adults;
• trustees appointed to hold digital assets or other property;
• agents appointed under Alberta’s Personal Directives Act; and
• the Public Guardian and Public Trustee.

Additional categories of fiduciaries could also be prescribed by regulation.

Under the proposed legislation, any term in a service agreement which limits a fiduciary’s ability to access a digital asset would be void and unenforceable. The Institute does recommend an exception to this rule, however, if an “account holder expressly and separately agrees to that term after the legislation comes into effect.” Virtual custodians would also be prevented from relying on choice of law clauses in service agreements if they purported to limit fiduciaries’ access to digital assets.

One noteworthy limitation regarding the proposed legislation is that it would only apply to digital assets held by virtual custodians. Practically speaking, it would not enable fiduciaries to access digital assets held directly by a donor, such as cryptocurrency.

Currently there appears to be no plan to enact legislation in Ontario which would expressly permit fiduciaries to access digital assets held by virtual custodians, although no doubt such legislation would be useful.

Thank you for reading – I hope you enjoy the rest of your day,

Suzana.