This week on Hull on Estates, Paul Trudelle and Nick Esterbauer discuss the state of the law in Canada regarding fiduciary access to digital access, as well as the potential for the Uniform Access to Digital Assets by Fiduciaries Act to provide clarity in respect of the authority of estate trustees and guardians/attorneys of property.
My other two blog posts this week have focused on the utility of model legislation that has been introduced in Canada and the United States to address the issue of fiduciary access to digital assets, and some of the primary differences between the uniform acts of these two jurisdictions.
Today, I take the opportunity to highlight the prevalence of digital assets through the use of some interesting (and somewhat surprising) statistics:
- 99% of North Americans use at least one personal online tool;
- A 2013 study by McAfee suggests that Canadians value their digital assets at an average of more than $32,000.00. Since 2013, the prevalence of digital assets has increased significantly;
- Worldwide, Bitcoins are valued at almost $22 billion, with over $2 million in Bitcoins exchanged every day;
- As many of our readers already know, many Canadians (estimated to be more than 60%) do not have a Last Will and Testament. Of those who do have a Will, 57% of North Americans aged 45 and older have not included provisions that address access to digital assets as part of their formal estate plan. Such provisions may be required in order for an estate trustee to gain access to digital assets, absent the enactment of legislation permitting same or a court order granting access.
Our blog has previously covered some of the common issues resulting from the inattention to digital estate planning, which can arise regardless of the financial value of the assets in dispute.
Have a great weekend,
Other blog posts that you may enjoy reading:
Canada’s model legislation regarding digital assets, the Uniform Access to Digital Assets by Fiduciaries Act (the “Canadian Model Act”), was introduced in August 2016, and borrows heavily from its American predecessor, the Revised Uniform Fiduciary Access to Digital Assets Act (the “American Model Act”).
The Canadian Model Act defines a “digital asset” as “a 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.” As with the definition appearing within the American Model Act, this definition does not include title to an underlying asset, such as securities as digital assets. Unlike the American Model Act, the Canadian Model Act does not define the terms “information” or “record.”
In the Canadian Model Act, the term “fiduciary” is also defined similarly as in the American Model Act, restricting the application of both pieces of model legislation to four kinds of fiduciary: personal representatives, guardians, attorneys appointed under a Power of Attorney for Property, and trustees appointed to hold a digital asset in trust.
One challenge that both pieces of model legislation attempt to address is the delicate balance between the competing rights to access and privacy. The American Model Act is somewhat longer in this regard, as it addresses provisions of American privacy legislation to which there is no equivalent in Canada. Canadian law does not treat fiduciary access to digital assets as a “disclosure” of personal information. Accordingly, under Canadian law, the impact on privacy legislation by fiduciary access to digital assets is relatively limited.
The Canadian Model Act provides a more robust right of access to fiduciaries. Unlike the American Model Act, the Canadian Model Act does not authorize custodians of digital assets to choose the fiduciary’s level of access to the digital asset. Section 3 of the Canadian Model Act states that a fiduciary’s right of access is subject instead to the terms of the instrument appointing the fiduciary, being the Power of Attorney for Property, Last Will and Testament, or Court Order.
Unlike the American Model Act, the Canadian equivalent has a “last-in-time” priority system. The most recent instruction concerning the fiduciary’s right to access a digital asset takes priority over any earlier instrument. For example, an account holder with a pre-existing Last Will and Testament, who chooses to appoint a Facebook legacy contact is restricting their executor’s right to access their Facebook account after death pursuant to the Will.
Despite their differences, both pieces of model legislation serve the same purpose of facilitating access by attorneys for or guardians of property and estate trustees to digital assets and information held by individuals who are incapable or deceased and represent steps in the right direction in terms of updating estate and incapacity law to reflect the prevalence of digital assets in the modern world.
Thank you for reading,
Later this week, House Bill 432 will come into effect in Ohio to update state estate and trust administration law. One of the most notable updates is the adoption of the Revised Uniform Fiduciary Access to Digital Assets Act, along with corresponding updates to Ohio’s Power of Attorney Act.
The American Revised Uniform Fiduciary Access to Digital Assets Act is intended to formalize the authority of attorneys for property and estate trustees to obtain access to digital assets for deceased or incapable users. Prior to its implementation in American states (and in other jurisdictions in which comparable legislation has not yet been introduced), the intervention of the courts has often been required to grant fiduciaries with access to information and assets stored electronically. There continues to be some debate as to whether an attorney for property or estate trustee, authorized to administer tangible property, also has the authority to manage digital assets without legislation and/or terms of the Power of Attorney or Will explicitly extending this authority.
Interestingly, the Revised Uniform Act has been endorsed by Google and by Facebook, both platforms on which a great deal of the world’s digital assets are stored. In 2016, 13 states introduced the Revised Uniform Fiduciary Access to Digital Assets Act. With the introduction or enactment of the Revised Act in another 24 states since the beginning of 2017 alone, it is clear that state legislatures and online service providers alike agree that amendments to the law in recognition of the growth of technology is required to clarify the state of the law of digital assets and fiduciaries.
The Uniform Law Conference of Canada introduced the Uniform Access to Digital Assets by Fiduciaries Act (2016) this past summer. While the uniform acts of Canada and the United States share a number of similarities, there are several important distinctions, which will be highlighted in Thursday’s blog post.
Thank you for reading,
Other blog posts that may be of interest:
Just over a week ago, the Canadian Immigration and Citizenship website crashed following the conclusion of the U.S. presidential election. After hearing about this, I started to wonder, how difficult would it really be for Americans who are dissatisfied with the outcome of the recent election to flee to Canada?
Aside from entering the country on a student or work visa, certain individuals wishing to immigrate to Canada may apply for Express Entry as a skilled worker, caregiver, or a refugee. Americans with family in Canada may also be able to apply directly for immigration to a province through the Provincial Nominee Program.
Individuals qualifying for immigration to Canada who may be considering doing so should not neglect cross-border tax and estate planning issues that may result from their relocation before proceeding with such a move.
When moving from one jurisdiction to another, it is important that one takes extra steps to ensure that elements of existing incapacity and/or estate plans will be recognized in his or her new home.
If new Canadian residents own assets cross-border, it may result in difficulty in administering property during incapacity and/or following death. It is important that fiduciaries are chosen appropriately, so as to facilitate their access to assets in the relevant jurisdiction, without triggering cross-border tax issues and issues of inaccessibility. Depending on the jurisdiction, taxes may be payable with respect to foreign assets based on citizenship, residence, location of the individual or his or her assets, domicile, or any combination of these factors.
It is also important to remember that simply immigrating to Canada may not exempt U.S. citizens from the payment of American inheritance tax. As my colleague, Noah Weisberg, blogged last month, President Elect Trump has vowed to abolish inheritance tax altogether. However, Mr. Trump has proposed to replace current U.S. inheritance tax with what is being referred to as a capital gains tax that applies to assets of certain estates valued at $10 million or greater. At this point in time, it remains unclear which of the policies upon which the incumbent president’s campaign was based will ultimately be implemented.
Have a great weekend.
This September marks the fifth annual World Alzheimer’s Month. World Alzheimer’s Month and World Alzheimer’s Day, which took place on Wednesday, are part of a campaign to increase awareness of dementia and related misconceptions.
In honour of World Alzheimer’s Day, Global News posted an article outlining five common misconceptions about dementia. They focused on the following:
- “Misconception: A diagnosis of Alzheimer’s disease or dementia means my life is over.” Individuals can continue to live and function normally for years despite a diagnosis with Alzheimer’s disease.
- “Misconception: Dementia is a disease of the elderly.” Although the likelihood of developing dementia and other memory issues may increase with age, early-onset dementia can affect individuals in their 40s or 50s. In Canada, approximately 16 thousand of those living with dementia are under the age of 65.
- “Misconception: There’s nothing I can do to prevent or stave off dementia.” Research suggests that there are ways to limit the risks of developing dementia, such as an active and social lifestyle and a healthy diet.
- “Misconception: Dementia and Alzheimer’s disease are all about memory loss.” Dementia goes deeper than memory loss and this misconception may trivialize the disease.
- “Misconception: One of my parents had Alzheimer’s disease, so I’m going to get it, too.” The most common forms of dementia do not appear to be genetically inherited, so the risk of developing Alzheimer’s is only loosely connected to family history of the disease.
Have a great weekend.
I was reminded today by this insightful article by Bryan A. Garner, titled “10 Tips for Better Legal Writing”, that secondary sources are an important component of legal research.
In addition to the 5th edition of Probate Practice, Ian M. Hull and Suzana Popovic-Montag are also co-authors of the 4th edition of Feeney’s Canadian Law of Wills, along with James MacKenzie. Both of which were recently released.
The 4th edition of Feeney’s provides a straightforward commentary on the existing probate and estate administration regimes, in addition to in depth commentary on the applicable case law. The 4th edition of Feeney’s is a resource that draws from statute and case law across all provinces of this country as well as the Commonwealth and the U.S.
As an example, the 4th edition of Feeney’s was recently cited in Vanier v. Vanier, 2016 ONSC 4620, for the following summary of the law on undue influence (at paragraph 10),
“In general, to establish undue influence, the burden of proof rests with the party alleging it. The extent of the influence must amount to coercion; simple influence is not enough. The testator’s free will must be overborne. Put another way, it is not improper for any potential beneficiary to attempt to influence the decision of the testator provided the pleading does not amount to coercion and the latter continues to act as a free agent. “Some begging is permissible.” See Feeney’s Canadian Law of Wills, 4th at 3.10 to 3.14; Hall v. Hall (1868), L.R. 1 P. & D. 481.”
All 18 chapters of this loose-leaf are available for purchase here at the LexisNexis Online Store.
Thanks for reading.
Earlier this week, I blogged about criminal offences involving the theft and destruction of testamentary documents. Case law dealing with these provisions of Canada’s Criminal Code is sparse.
The 2015 British Columbia Supreme Court decision in D’Angola v. British Columbia involved multiple allegations, including an accusation that a last will and testament had been fraudulently concealed contrary to section 340 of the Criminal Code. The matter featured a mandamus application by the daughter of the deceased, who sought her sister’s prosecution for this and various other alleged violations of the Criminal Code.
The deceased, the father of the sisters, had left a will dated May 6, 2003. The will named the applicant’s sister as estate trustee and otherwise treated both sisters equally. The applicant had apparently inquired of her sister whether the deceased had a will after their father died and did not receive a clear response. Approximately five months later, the named estate trustee contacted the applicant by email and informed her of the existence of their father’s will. Eventually, the applicant was informed, by counsel for the applicant’s sister, that the sister had been named as estate trustee, was in the process of administering the estate, and that the deceased’s property located in Italy had been transferred to the two sisters and their mother in accordance with Italian succession law. The applicant later became dissatisfied with the estate trustee’s administration of the estate, stating that her conduct in that regard had been both negligent and criminal.
In summarizing the Lower Court’s decision regarding the allegation of criminal concealment of the will, Justice V. Gray noted that “even if the Sister concealed the Late Father’s will, there [was] no evidence of a fraudulent purpose on the part of the Sister, and there was nothing for the Sister to gain by concealing it.” Justice Gray declined to exercise the discretion to order a reconsideration of the issues by the Court.
Although few other decisions consider allegations of criminal theft and/or concealment of wills, this decision by the British Columbia Supreme Court suggests that, with respect to allegations of concealment under section 340 of the Criminal Code, a fraudulent purpose will be a prerequisite. Further, the Court’s considerations may include whether any benefit has been received by the accused in concealing the testamentary instrument.
Thank you for reading.
Our blog has previously discussed the importance of original testamentary documents at length. Typically, an original will is required in order to apply for a Certificate of Appointment of Estate Trustee With a Will. If an original will cannot be located, it may be presumed that it was physically destroyed, and therefore revoked, by the testator. Alternatively, a copy of a will may be admitted to probate upon the filing of a lost will application. However, this remedy is not a fix-all that can be used in all situations in which an original will cannot be located and, even when successful, will result in additional legal fees and delays in the administration of the estate.
Certain provisions within the Criminal Code of Canada criminalize the theft and destruction of another person’s testamentary instruments in recognition of the importance of these documents. At Section 2, the Criminal Code defines a “testamentary instrument” as including “any will, codicil or other testamentary writing or appointment, during the life of the testator whose testamentary disposition it purports to be and after his death, whether it relates to real or personal property or to both”.
Typically, the theft of personal property valued at less than $5,000.00 is a summary offence and can result in up to two years of imprisonment. Where stolen property meets the definition of a testamentary instrument, the seriousness of the crime is elevated to an indictable offence, punishable by up to ten years in prison (section 334(a) of the Criminal Code). The possession of a stolen testamentary instrument is also a crime in Canada. The Criminal Code prohibits possession of property obtained by a criminal act and specifically identifies the possession of a stolen testamentary instrument as an indictable offence with a penalty of up to ten years of prison (sections 354, 355(a)).
Similarly, the destruction, concealment, cancellation, or obliteration of a testamentary instrument “for a fraudulent purpose” is an indictable offence and a conviction may result in up to ten years of imprisonment (section 340). The destruction of a testamentary instrument as a result of an act of mischief is also an indictable offence , punishable by up to ten years in prison (section 430(3)).
The provisions of the Criminal Code outlined above illustrate the significance of the original copy of a last wills and testaments, codicils, and other testamentary documents in Canada and the lengths that the law will go to in protecting the sanctity of these original documents that are typically required in order to administer an estate in the way intended by the testator.
Thank you for reading.
Lessons from Neuberger Part 1: Does an interested person have an automatic right to proof in solemn form?
The Ontario Court of Appeal released not one, but two, decisions last week in relation to a Will Challenge proceeding. In addition to Spence v. BMO Trust Company, 2016 ONCA 196 (which is well covered by the media, and by our blog here), the Court of Appeal also released the decision of Neuberger v. York, 2016 ONCA 191.
The case of Neuberger v. York involves the Estate of Chaim Neuberger. The late Chaim Neuberger was a holocaust survivor, and Toronto real estate mogul, whose success equated to a fortune of over $100 million on his death according to the National Post. Chaim was predeceased by his wife, Sarah Neuberger, and he was survived by his daughters, Edie Neuberger, and Myra York, and the adult children of Edie and Myra. Edie and Myra were the named Estate Trustees of Chaim’s 2010 Wills, as well as his prior 2004 Wills.
Chaim passed away on September 25, 2012, and Edie brought an application to challenge the validity of Chaim’s 2010 Wills on December 19, 2013. In January, 2014, Edie’s son, Adam, also brought a motion to challenge the validity of Chaim’s 2010 Wills, amongst other relief. Edie’s Will Challenge was dismissed at first instance, along with Adam’s Will Challenge.
On appeal, Adam argued that an “interested person” is entitled, as of right, to have a Will proved in solemn form, prior to a grant of probate. Adam argued that this right stems from Rule 75.01 of the Rules of Civil Procedure, which reads as follows:
FORMAL PROOF OF TESTAMENTARY INSTRUMENT
75.01 An estate trustee or any person appearing to have a financial interest in an estate may make an application under rule 75.06 to have a testamentary instrument that is being put forward as the last will of the deceased proved in such manner as the court directs.
On this point, the unanimous Court of Appeal disagreed. The Hon. Justice Gillese considered a plain reading of Rule 75.01, in conjunction with Rule 75.06, and determined that an “interested person” may request proof in solemn form but cannot require it (at paragraph 84). Moreover, “the court has a discretion whether to order that a testamentary instrument be proved, as well as a discretion over the manner in which the instrument is proved” (at paragraph 87). The correct approach to Rule 75.06 requires an applicant, or moving party, to “adduce, or point to, some evidence which, if accepted, would call into question the validity of the testamentary instrument that is being propounded” (at paragraph 89).
Thanks for reading! Stay tuned this week for more lessons from Neuberger.