Managing digital assets has become a crucial aspect of estate planning. As individuals increasingly rely on digital platforms for communication, financial transactions, and personal data storage, the need to address these assets in estate planning is more important than ever.
Understanding Digital Assets
Digital assets encompass a wide range of online accounts and electronic records, including social media profiles, email accounts, online banking, cryptocurrencies, and digital media collections. These assets often hold significant financial and sentimental value, making their management a critical component of comprehensive estate planning.
Unlike traditional assets, digital assets are typically stored on servers located in various jurisdictions around the world, creating complex challenges for estate planning and administration. For Ontario residents, this complexity is heightened when digital assets are governed by foreign laws or hosted by international service providers, potentially leading to jurisdictional conflicts that complicate access, transfer, and distribution of these assets. Understanding the unique nature of digital assets and the legal hurdles they present is essential for effective estate planning and avoiding costly disputes in cross-border estates.
Jurisdictional Conflicts
Due to digital assets being stored on servers globally, there is a degree of uncertainty about which laws apply when accessing or transferring the digital assets after the owners’ death. Ontario’s estates law governs the administration of a deceased’s property within the province, but when digital assets are controlled by entities in other countries, conflicting legal regimes can arise. An example of this is a cryptocurrency wallet that is held on an exchange based in the United States or Europe, which may be subject to privacy laws, fiduciary access rules, or probate procedures that differ from the ones here in Ontario.
Further, privacy regulations like the European Union’s General Data Protection Regulation (“GDPR”) can restrict access to personal data – even for executors or estate trustees – unless specific conditions are met. The result of this is Ontario fiduciaries facing legal barriers when attempting to retrieve digital assets or data stored on servers overseas. This can lead to delays in the administration process, increased costs, and in some instances, loss of assets.
Ontario’s Legal Framework for Estate Administration
Ontario estates law is well-developed when it comes to traditional property, but it has yet to fully adapt to the unique legal issues that come with digital assets – particularly those held or controlled outside the province. As a result, estate trustees in Ontario may face conflicting legal regimes, unclear authority, and limited case law guidance when dealing with cross-border digital assets.
Under Ontario law, estate administration is governed primarily by:
- The Successional Law Reform Act (“SLRA”);
- The Estates Act; and
- The Trustee Act.
These statutes govern how estates are to be administered, who can act as the estate trustee, and what powers they have. However, they do not mention or address digital assets, nor do they address jurisdictional issues where foreign laws or contracts may apply.
Ontario Case Law
The Ontario Superior Court of Justice recognized in Kirshenberg v. Schneider, 2023 ONSC 2809, that digital assets, including cryptocurrencies held in digital wallets, may be subject to interim preservation orders, provided that the standard test for such orders is met. While the court did not definitively define digital assets like Ether as “property” under Ontario law, it noted that courts in the United Kingdom and British Columbia have treated cryptocurrencies as property for the purposes of injunctive relief.
Further, in Corbin v. The Shepherds’ Trust, 2024 ONSC 4402, the Ontario court applied Ontario law to the formal validity of a will that was executed by the Deceased while they were domiciled in Ontario, but they applied the law of Italy to the disposition of real property that was in Italy. This case illustrated that the situs of an asset can determine which jurisdiction’s law governs its succession, which is an important issue for digital assets, as they may be considered intangible property or reside on servers in different locations.
Digital assets pose unique challenges for Ontario estate planning, particularly when they are stored or governed outside the province. Conflicting laws, restrictive terms of service, and international privacy regulations can complicate access and delay administration. With Ontario’s legal framework still evolving in this area, proactive planning is essential. By identifying digital assets early and addressing jurisdictional issues in estate documents, individuals can help ensure these assets are preserved and distributed according to their wishes.
Thanks for reading!
David Morgan Smith and Jason Avsenik (student-at-law)