Tag: digital assets
We have previously blogged extensively on the issue of inaccessibility of digital assets and the absence of legislation in Canadian provinces, including Ontario, to clarify the rights of a fiduciary to access and administer digital assets on behalf of a deceased or incapable rights holder.
While the Substitute Decisions Act, 1992, and Estates Administration Act provide that attorneys or guardians of properties and estate trustees, respectively, are authorized to manage the property of an incapable person or an estate, Ontario does not currently have any legislation that clarifies these rights by explicit reference to digital assets. While continuing powers of attorney for property and wills can be crafted to explicitly refer to digital assets and the authority of an attorney for property or estate trustee to access accounts and information in the same manner in which the user him or herself was able, access issues can still arise during incapacity or after death.
A recent CBC article highlights the inadequacy of legislation facilitating access to digital assets. A surviving wife of over forty years was the estate trustee and sole residuary beneficiary of her late husband’s estate. In seeking access to an Apple account that she shared with her husband, she was told that she would require a court order, even after providing Apple with a copy of her husband’s death certificate and will. Apple cited the United States’ Electronic Communications Privacy Act, which predates the prominence of computers and the internet in our daily lives, as prohibiting them from distributing personal electronic information. Four years after her husband’s death in 2016, the Ontario woman is now obtaining pro bono assistance in seeking a court order granting access to the shared account in the absence of any other options.
It is anticipated that the adoption of the Uniform Law Conference of Canada’s Uniform Access to Digital Assets by Fiduciaries Act would resolve some or all of the issues currently faced by Ontario residents in accessing and administering digital assets. However, now over four years since its release, only Saskatchewan has implemented provincial legislation mirroring the language of the uniform act.
It will be interesting to see in coming years whether legislative updates will address continued barriers to the access and administration of digital assets and the corresponding access to justice issue.
Thank you for reading,
Other blog entries that may be of interest:
Coinbase co-founder and CEO Brian Armstrong recently blogged about the future of cryptocurrency, predicting that it will reach 1 billion users by the year 2030 (up from about 50 million at the start of this decade). With the anticipated increased uptake of cryptocurrency, we can expect that more and more people will hold these types of digital assets on their death. The question then arises: how should cryptocurrencies be dealt with in one’s estate plan?
By way of background, cryptocurrency is virtual currency that uses cryptography to verify financial transactions and control production of currency units in a decentralized, peer-to-peer exchange network. Cryptocurrency runs on Blockchain technology, which allows for blocks of information about transactions to be recorded and stored on a distributed ledger. When a transaction takes place, a block is added to the blockchain and there is a corresponding change in balance in the buyer and seller’s cryptocurrency wallets.
A cryptocurrency wallet or “crypto wallet” contains a person’s public and private keys – the former is used to receive cryptocurrency and the latter is used to spend/send cryptocurrencies to other wallet addresses. The crypto wallet is the only means of accessing one’s digital currency. There are different types of wallets that can be used to store and access digital currency, such as online accounts, mobile apps, external hard drives, or simply paper.
Because cryptocurrency is an intangible asset with little to no paper trail, special estate planning considerations should be made to ensure that the value of these digital assets is not lost on death and can be distributed to the intended beneficiaries.
First, the cryptocurrency owned by a person should be expressly referred to in their will to ensure that their executor is aware that these digital assets exist. A testator should then provide sufficient detail for their executor to be able to locate and access the testator’s crypto wallet. Specifically, the testator should describe what type of crypto wallet they have, where it is stored, and provide any other information that may be needed to access the crypto wallet. Instead of listing this sensitive information in the will itself, which becomes part of the public record through the probate process, a testator should include it in a memorandum to their will.
Thanks for reading!
I am not sure why, but whenever I talk to my friends about the benefits of having a Will, they seem to dismiss the advice, thinking that Wills are only meant for old people. I was thus delighted to come across this article which highlights millennial-centric reasons for having a Will, some of which are as follows:
Digital Assets – while many millennials attest to not being flush with cash, many are flush with digital assets. I have previously written about my digital presence, admitting that I have two personal e-mail addresses, four social media accounts, and so many points through reward programs such as Aeroplan, Indigo, Greenhouse Juice – the list goes on and on. These assets carry both a financial and personal value. Millennials preparing a Will should think about how they wish to transfer these assets.
Young Children – if a child is a minor, under the Children’s Law Reform Act, it is possible for a testator to appoint one or more persons to have custody of that child in a Will. It is also possible to set up a trust in the Will to ensure that the child’s inheritance is spent responsibly. I often tell people that in making a Will, do not think of it as being done to benefit oneself (i.e. the testator), but to benefit and help your loved ones. Being able to take care of minor children is a great example of this.
Pets Pets Pets – without engaging in the dog vs cat debate, it is suffice to say that many millennials have pets. In fact, millennials these days are opting for pets over parenthood – just walk through Trinity Belwoods Park on a Saturday afternoon. In Ontario, pets are considered property, and thus require specific estate planning. Some options include leaving a cash legacy to a pet guardian or setting up a trust for a pet guardian, both of which can be accomplished in a Will.
Hoping that my millennial friends now agree that Wills aren’t just for old people!
Consider this blog interesting, please consider these other related blogs:
Traditionally, the transition from adolescence into formal adulthood has been marked by certain milestones: moving in with one’s partner, engagements, weddings, and the first purchase of a car or house, for example.
Today, however, as Dr. Steven Mintz notes in this Psychology Today article on modern adulthood, the journey to achieving adult status is “far slower and much less uniform” than it was in previous generations.
The Canadian Encyclopedia reports that in recent years, the average age of first marriage in Canada is close to 30 years old for women, and 32 years old for men. This contrasts sharply with the 1960s and 1970s, when young people in Canada were more likely to marry between the ages of 23 and 25 years old.
Similarly, while the average young adult in the sixties could expect to achieve such “emblems of adulthood” as home ownership, marriage, children, and a stable job by around the age of 24, far fewer young adults in the 2000s will have attained these markers by this same period. According to Statistics Canada, 54% of men and 43.4% of women in Canada have never married by their early thirties. In Mintz’s article, he notes that rates of childbearing, homeownership, and even car ownership for young adults have also distinctly declined from those of past generations.
Notably, many of the traditional adulthood markers relate to asset accumulation – whether it’s the paycheque associated with a steady and lucrative job, or an investment in a home or vehicle, for example. With fewer millennials travelling down these conventional paths to adulthood, and arguably having fewer assets to their names, should today’s young adults be concerned with formulating a plan for their Estate?
In my view, the answer is yes. This blog will address three of many reasons to set up an Estate Plan as a young adult today.
- Your assets can be distributed to the beneficiaries of your choice, instead of being determined by Intestacy
In Ontario, Part II of the Succession Law Reform Act (the “SLRA”) governs how one’s assets will be divided if a person dies “intestate” – namely, without a Last Will.
As many young millennial adults are unmarried and without children, I will focus on subsections 47(3)-(11) of the SLRA. These subsections delineate how an estate will be divided if one dies without a will and has neither a spouse nor children (notably, common law spouses are not included as a “spouse” on intestacy). These rules can be summarized as follows:
- If the Deceased has no spouse and no issue, the estate goes to the Deceased’s surviving parents, equally.
- If there are no surviving parents, the estate goes to the Deceased’s siblings equally (and if a sibling has predeceased, that sibling’s share goes to their respective children).
- If there are no siblings, the estate goes to the Deceased’s nephews and nieces equally.
- If there are no nephews or nieces, it goes to the next of kin of equal degree of consanguinity – in some cases, distant relatives can end up inheriting from the estate, despite otherwise having no relationship with the Deceased.
- If there are no next of kin, the estate escheats to the Crown.
Making an estate plan empowers a party to decide specifically to whom their assets – of both financial and sentimental value – will go.
Importantly, and as we have blogged on previously, any unpaid debts of the Deceased, in addition to the expenses and liabilities of the estate (e.g. funeral expenses, taxes, legal fees, etc.), are a first charge on the assets of the estate, and must be paid by the estate before assets will be distributed to beneficiaries.
- You can choose who will manage your assets, limited or not
By way of a Last Will and Testament, one can appoint an Estate Trustee (or Estate Trustees) of their Estate. Among many other critical duties, the Estate Trustee is responsible for securing the assets of the Estate; settling any of the of the Deceased’s debts and taxes; ensuring the Deceased’s assets are distributed in accordance with the Deceased’s wishes; and, often, tending to funeral arrangements.
When a person dies intestate and an Estate Trustee is not appointed, the process of the administration of their Estate becomes much more onerous, potentially more expensive, and can be significantly delayed. By executing a Will which appoints an Estate Trustee, one can ensure that a responsible and trustworthy person, who is up to the task, will give effect to their final wishes and manage their estate effectively after death.
- You can document your intentions for your intangible, digital assets
This recent Globe and Mail article sums it up succinctly: neglecting to plan for one’s online assets can create “huge headaches” for executors, especially in light of Canadians’ “expanding digital footprints”.
In addition to those online assets which have true financial value – such as cryptocurrency, Paypal accounts, and some loyalty rewards programs – many digital assets, like Facebook or Instagram accounts, can have significant personal and sentimental value. By stating one’s preferences for digital assets management in an estate plan, one can better ensure that their wishes for these assets are honoured, and potentially reduce conflicts between loved ones that might otherwise arise in this respect. The Globe and Mail cites Facebook profiles as a prime example:
” … some loved ones may want a family member’s Facebook profile to remain active after they pass away, for remembrance; while others might want to delete the account, for closure.”
If this article has inspired to start your estate planning process, we encourage you to meet with a trusted Estates Lawyer to assist with your planning needs.
Thanks for reading!
Cryptocurrency is aptly described in a recent post as “digital cash stored on an electronic file and traded online… like online banking but with no central bank or regulator. It also has virtual wallets which store the cryptocurrency.”
As with any online assets, access to a deceased person’s cryptocurrency is vital. Without it, heirs will not receive their intended entitlements and the cryptocurrency will remain dormant. A stark example of such a problem can be found in the QuadrigaCX debacle.
QuadrigaCX is Canada’s biggest cryptocurrency exchange. Its’ founder, Gerald Cotton, died unexpectedly and prematurely at age 30. He was the only one who knew the password to access the holdings of the company’s clients. Once news of his death got out, thousands of clients were rushing to withdraw millions in funds. They have not yet been successful, the reason being, as one author explains, is that “…Cotten was the sole person responsible for transferring QuadrigaCX funds between the company’s “cold wallet” — secure, offline storage — and its “hot wallet” or online server…Very little cryptocurrency was stored in the hot wallet for security purposes. Cotten’s laptop was encrypted, and his widow, Jennifer Robertson, and the expert she hired have been unable to access any of its contents.”
QuadrigaCX is evidently now in financial straits. It has filed for creditor protection in the Nova Scotia Supreme Court. Further, Ms. Robertson has reportedly sought the appointment of Ernst & Young to oversee the company’s dealings while attempts to recover the lost holdings continue.
This unfortunate situation highlights the risk that may accompany cryptocurrency’s lack of regulation. It also serves as a reminder to us that with ownership of digital assets growing, we need to think about how to ensure that gifting such assets is effected, including making sure to inform our intended estate trustees of how to access the assets. Doing so is helpful because, as the above case demonstrates, it is a must in the case of cryptocurrencies to have the password relevant to the wallet where the currency is held. Further, with an asset as volatile as cryptocurrency can be, a fully informed estate trustee will be in a better position to avoid delays in the administration of an estate and/or allegations of mismanagement if he/she is able to quickly access and distribute such assets.
Thanks for reading and have a great day,
While digital assets constitute “property” in the sense appearing within provincial legislation, the rights of fiduciaries in respect of these assets are less clear than those relating to tangible assets. For example, in Ontario, the Substitute Decisions Act, 1992, and Estates Administration Act provide that attorneys or guardians of property and estate trustees, respectively, are authorized to manage the property of an incapable person or estate, but these pieces of legislation do not explicitly refer to digital assets.
As we have previously reported, although the Uniform Law Conference of Canada introduced the Uniform Access to Digital Assets by Fiduciaries Act in August 2016, the uniform legislation has yet to be adopted by the provinces of Canada. However, recent legislative amendment in one of Ontario’s neighbours to the west has recently enhanced the ability of estate trustees to access and administer digital assets.
In Alberta, legislation has been updated to clarify that the authority of an estate trustee extends to digital assets. Alberta’s Estate Administration Act makes specific reference to “online accounts” within the context of an estate trustee’s duty to identify estate assets and liabilities, providing clarification that digital assets are intended to be included within the scope of estate assets that a trustee is authorized to administer.
In other Canadian provinces, fiduciaries continue to face barriers in attempting to access digital assets. Until the law is updated to reflect the prevalence of technology and value, whether financial or sentimental, of information stored electronically, it may be prudent for drafting solicitors whose clients possess such assets to include specific provisions within Powers of Attorney for Property and Wills to clarify the authority of fiduciaries to deal with digital assets.
Thank you for reading.
Other blog posts that may be of interest:
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: