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May 8, 2014

Digital life after death: Practice tips for estate planning and administration

By Johanna C.C. Caithness and Iain C. McDonald

Individuals are increasingly purchasing, creating, organizing and selling digital assets and using the Internet to pay bills, bank, invest and shop. How an individual’s online and digital “presence” is dealt with after death is becoming increasingly relevant from the perspectives of both estate planning and estate administration.

What are Digital “Assets” and Digital “Accounts”?

There is a distinction between “digital assets” and “digital accounts”. It may be helpful to think of digital assets as property or material, and digital accounts as the access to property or material.

The term “digital assets” can include many assets, including files on home computers, external hard drives, smartphones and tablets. In most cases, these files will consist of photographs, electronic documents and music or video files. Where these files are not accessed using online accounts governed by terms of use agreements, they will be much easier to deal with from a legal perspective.

Access to Digital Assets and Accounts

The matter of access to digital assets and accounts can be extremely complicated. In Canada, there is a lack of legislation with respect to granting access rights to estate administrators. One reason for this is the law has yet to catch up with technology; another is the conflict between the privacy rights of deceased persons and the access by estate administrators after death. An estate administrator will need to carefully review the terms of use for specific digital accounts, since access by the personal representative may be a violation of terms of use.

The right to access and the ability to access are two different things. An executor may be in a situation where access is available (for example, where the deceased person has provided a password), but is prohibited by the terms of service agreement governing the account or asset. Terms of service agreements attempt to maintain the privacy and security of the user of an account, and may create unanticipated results after the death of a user.

Courts in Canada have determined that terms of service agreements (often called “Click-Wrap Agreements”) are legally binding contracts in Canada. These terms of service agreements appear when a user first signs up for an online account, wherein the user clicks a box (normally at the bottom of the page) indicating that a user agrees to the terms of use for the online account.

A violation of terms of use may lead to a denial of access to an asset or the account being shut down, and could result in other legal consequences. If an account is shut down due to a violation of the terms of use by an executor and an asset of value is lost, the result could be a claim by a beneficiary against the executor.

Content Ownership

Another challenge relating to digital assets is with respect to ownership of content. It is easy to think that the content created by an individual using a digital account would be his or her intellectual property; however, many terms of service agreements actually grant ownership of online content created by the user to the website or service provider. For example, Facebook legally owns the contents of all Facebook profiles. It is important to review the terms of service agreements with respect to content ownership so one knows what may make up part of their estate.

Practice Tips – Estate Planning

When planning an estate, a lawyer will normally ask a client to for a list of their assets. Digital assets and accounts should be included in this list. A client may wish to create a list of all digital assets and accounts (whether such assets or accounts may have value or not), and leave the list with the will so that the executor is aware of the existence of the assets and accounts. It would be helpful to have a list of passwords available as well. As a probated will becomes a public document, passwords or other sensitive information should not be listed in the will.

It may be better to create a hard copy list than an online or computer list since there may be access issues if the list is on a device, but where passwords or assets and accounts change often, updating will be required and a hard copy list may be less practical. The key is to ensure that the executor will not face difficulty finding or accessing assets or accounts.

Practice Tips – Estate Administration

An executor should begin by making a comprehensive list of digital assets and accounts, beginning with the inventory provided by a testator (if one has been prepared). The executor should prepare a list of any available passwords to digital accounts and before attempting to access any assets or accounts, the executor should review all applicable terms of service agreements.

An executor will need to consider whether and how digital assets and accounts should be listed on the estate inventory and valuation issues.

As technology advances, digital assets and accounts will continue to form larger and more valuable portions of estates. Taking the time to think about digital assets and accounts during the estate planning process can ensure that such assets are dealt with as one wishes, and can result in an easier process for one’s executor.

Johanna C.C. Caithness is a lawyer at Fillmore Riley LLP practising primarily in the areas of taxation, wills and estates and corporate and commercial law. You may reach her at (204) 957 8301 or jcaithness@fillmoreriley.com. Iain C. McDonald is a lawyer at the firm who practises mainly in the areas of corporate and commercial law. You may reach him at (204) 957-8362 or imcdonald@fillmoreriley.com.

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