Navigating the digital afterlife

More than ever, Canadians are living their lives online. As our digital footprints grow, so too does the importance of planning for the management of digital assets on death or incapacity.

What are digital assets? It’s an interesting question, and one that’s surprisingly elusive. When we think of an “asset,” most of us imagine a form of property, something that is owned and can therefore be sold or gifted. But the term “digital asset” extends beyond traditional notions of property to include a wider range of electronic things. Social media accounts, electronic communications (such as emails), cloud storage, accounts with retailers and loyalty programs are all examples of digital assets—some of which more clearly satisfy our notions of property than others.

The value of digital assets can be financially significant in a traditional sense, but digital assets often have special sentimental value (digital photographs, emails and music) or are personally revealing (search histories, location data or private messages). Digital assets provide clues about a deceased individual’s private life in a way that nothing before ever has. Given the amount of digital information that is recorded about each of us, digital assets are unique in estate planning for their potential, for better or for worse, to reveal us as we lived. Given their importance, planning for death or incapacity now requires planning for the administration of digital assets, balancing privacy against the orderly transfer of intangible property and the decedent’s digital legacy.

But there are complications.

The rights of digital asset holders are often determined by the user agreements entered into at the time the digital asset is created. Opening a social media account, for instance, usually requires the user to agree to a briefly displayed and easily ignored “clickwrap” user agreement. The user agreement often restricts the rights of the user’s estate to access an online account on death. It may also prohibit sharing password information (which would permit a trusted person to access the account in the event of death or incapacity). More often than not, the user agreement subjects the user to the laws of a foreign jurisdiction and requires that all claims against the internet company with whom the user agreement was made be brought there. On death, these agreements bind the estate and can force the executor into long battles to gain access to the account, often in the jurisdiction of the internet company.

There have been limited legislative reforms to address these issues. Saskatchewan was among the first provinces to enact legislation, in 2020. Based on model legislation accepted by the Uniform Law Conference of Canada, the Fiduciaries Access to Digital Information Act, SS 2020, c 6, provides that by default, fiduciaries (including executors) have access to digital assets, subject, in the case of a deceased person, to the terms of his or her will or court order. Prince Edward Island and New Brunswick followed in 2022 with similar legislation. To date, they remain the only three jurisdictions in Canada to address the issue head-on (although Alberta has amended its Estate Administration Act to include administering online accounts as a core duty of executors). (Update: Yukon became the fourth Canadian jurisdiction to pass legislation confirming fiduciary access to digital assets when it enacted the Fiduciaries Access to Digital Assets Act SY 2023, c15 on November 15, 2023.)

Even given the legislation, it is not clear that companies controlling digital assets based outside of Canada will always comply with demands made under it without further steps taken in their own jurisdictions.

Given the above, what should Canadians do? At a minimum, each of us should review our estate planning with a lawyer to ensure that digital assets are specifically addressed, and that the executor is given both the explicit authority to administer digital assets and instructions on their transfer or destruction. An up-to-date list of digital assets should be maintained, including their location and particulars necessary to identify them. If off-line back-ups are safe and appropriate, these should be considered. Finally, the terms of use governing each asset should be reviewed. Some internet companies provide for the designation of a legacy contact or the configuration of an inactive account manager. These tools, if available, can greatly reduce the strain on executors and provide certainty to the account holder. However, even with these steps taken, enforcement of a decedent’s wishes may prove challenging.

Consideration of digital assets is now a necessary part of a complete estate plan. This is a rapidly evolving area of the law, and one that is increasing in importance each year. On the bright side, it presents an excellent reason to think about the things that mean the most in your life, to talk about them with your family—and to seek legal advice that can deliver lasting value.

For more advice about planning with family trusts, KPMG Law’s Estates and Trusts group is here to help.