Imagine if you were to die tomorrow what your email account would provide for your loved ones: access to your contacts, personal and business communications, photos, and memories. While an email account may not be worth anything in terms of an estate, it could have a high emotional value for those closest to you.
Now imagine that your family legally cannot access that account even if you had provided them with the logon credentials with which to gain access. Many companies do not allow the transfer of ownership or rights over the account to anyone but the originator. And if anyone illegally accesses your email, the individual could face fines or even jail time for violating current on-the-books electronic privacy and anti-hacking laws.
Only when the estate produces a death certificate will the account be terminated and permanently deleted. While the information within an email account may not be significant, it is important to understand that strict privacy policies and service contracts have been put in place by companies to protect the account holder at all times. Short of a court order, there is presently little valid legal basis for an executor to assume ownership or even access the majority of digital assets.
This means, if a digital account was the only means of communicating with and/or accessing a particular investment (whether it be actual or digital, such as Bitcoins or photos, music and manuscripts stored in the cloud), it may prove extremely expensive to the estate in terms of legal fees, time and frustration to gain access.
Even if one’s parent had expressly written down accounts, user names and passwords as part of his or her estate paperwork, their own child, if appointed fiduciary of the estate, could face legal repercussions.
In Canada, these laws include the Privacy Act, the Personal Information Protection and Electronic Documents Act, and various other regulations in the Criminal Code tied to the Convention of Cybercrime. In the United States, there are the Electronic Communications Privacy Act and the Computer Fraud Abuse Act.
Laws, Regulations Neither Universal Nor Tested
In 2014, U.S. financial planners moved to bridge the gap between regulations and realities with the Uniform Fiduciary Access to Digital Assets Act (UFADAA), which was passed by the state of Delaware. The UFADAA allows access to parties acting in a fiduciary capacity such as an attorney, trustee or executor.
Even though this step allows legal access be granted to the interface, say the email account, the UFADAA automatically assumes the asset is an electronic record (think documents stored in a Dropbox account). Unfortunately, that’s not always the case. While there may indeed be electronic records of an online brokerage account, the underlying asset may not be electronic if it is ownership interest in a corporation as represented by equity holdings, for example. In such an instance, even where the UFADAA can be cited and used, it has limitations if the asset is governed by another service provider’s agreement with the original account holder.
Other states are lined up to pass legislation similar to Delaware’s UFADAA while Connecticut, Indiana, Rhode Island, Oklahoma Idaho, Virginia and Nevada have their own digital asset laws in place.
The same body behind the U.S. acts, the Uniform Law Conference (ULC), has a Canadian counterpart, the ULC of Canada. While the ULC of Canada is said to be keeping an eye on the topic, it has not driven any legislation or established case law.
The bottom line is there is no universal regulation in either the Canada or the United States for estate trustees and beneficiaries to gain access to all digital assets on behalf of the deceased. Canada lacks both legislation and case law. The U.S. has various state laws that not only remain largely untested in court, but are already out-of-date (the earliest date to 2005). This leaves the estate at the mercy of the service providers whose policies in most instances benefit them more than the deceased account holders’ beneficiaries.
Yahoo made news when it refused the parents of a Marine killed in battle access to their son’s emails to and from Iraq (it was later settled in probate court). Facebook made news when it successfully prevented the estate of a model who committed suicide access to any evidence of her state of mind as expressed through Facebook posts and messages.
Estate Planning Needs To Include Digital Assets
Clearly estate planning needs to include digital assets. One study1 found that 86% of Canadian Baby Boomers used at least one financial online tool.
Another survey conducted by Internet security firm McAfee showed that in the United States, citizens surveyed said they had up to $55,000 in unprotected digital assets; globally, this figure was $37,438. However, the study was done in 2011 and the exponential proliferation and adoption rate of digital assets has undoubtedly grown since then (think: tweets, e-books, MP3 files, Facebook, LinkedIn, PayPal, just for starters).
Digital assets can have significant monetary value in and of themselves, let alone as a gateway to further assets. These could include an iTunes account, a massive amount of e-books, online blogs which make money through advertisements, clicks and/or password-protected electronic orders and invoices. Executives may keep business plans on Google Drive, e-book authors may have agreements with Amazon and other outlets and, on the sentimental side, many families have digitized film, photos and videos and stored them electronically.
You may — or may not — want beneficiaries reading your email and going through your photos. The only way to address your preference is by drafting specific clauses in your will which first establish exactly what you mean by “digital asset,” details accounts and passwords, and provides the estate trustee explicit instructions on how you want these assets to be handled.
On a case-by-case basis, you will need to spell out to whom you give the power to access, handle, distribute and dispose of your digital assets, as well as who has the power to obtain, modify, delete or control any passwords or other “electronic credentials” associated with both digital devices and digital assets.
One tool in a US estate planner’s arsenal to circumvent all the national and state laws and to represent you is the establishment of a “digital asset trust.” This tool provides the argument that user accounts and logins for digital assets are licenses that expire on death but that through the use of trust law, they can be rendered no longer dependent on whether or not an individual is living or incapacitated.
Even if you want privacy and assume that companies will continue to protect it after you pass, you need to spell that out as undoubtedly laws and regulations will evolve. In the future, companies may be forced to give families access to a deceased person’s data or accounts.
While technology has developed much faster than the law and is likely to continue to do so, you need to be proactive by taking steps to articulate your wishes and ensure, as far as legally possible, that they are followed. Otherwise, your email and other digital accounts — whether you want them accessed or not — could be locked forever.
1Source: BMO Financial Group (April 2012). Estate planning in the 21st century: New considerations in a changing society. Web site: bmo.com
Advisory services are only offered to clients or prospective clients where the independent Cardinal Point firms and its representatives are properly licensed or exempt from licensure. Each firm enters into client engagements independently. Past performance is no guarantee of future results. This information is provided for educational purposes only and should not be considered investment advice or a solicitation to buy or sell securities. Investing involves risk and possible loss of principal capital. Copyright © 2015 Cardinal Point. All rights reserved.