Digital Assets and Planning for Incapacity

Canada presently boasts a population of more than 770,000 people aged 85 or older. In recent years, this group has grown nearly four times faster than the growth rate for Canada’s overall population. By 2051, Statistics Canada predicts that this number will increase more than threefold, such that 2.7 million people will be over the age of 85.

Alongside this growth in Canada’s aging population, technology has continued to develop and infiltrate Canadians’ daily lives. Email, texting, online banking, and social media websites such as Facebook, Twitter and Instagram are now commonplace, if not integral parts of today’s society. Recent surveys indicate that 99% of North Americans report using at least one personal online tool, while 85% report using at least one financial online tool. The use of digital resources is not just restricted to younger age groups – between 2013 and 2016 alone, internet use rose from 65% to 81% among 65- to 74-year-olds. Among those aged 75 and older, usage rose from 35% to 50% in the same period.

With Canada’s elderly population on the rise, and with the ever-growing modern prevalence of online and digital resources, it is of increasing importance to consider how one’s digital assets should be managed in the event of incapacity. At present, no formal legislation in Canada addresses digital asset planning. If parties do not ensure that these assets are planned for, they can put themselves, their personal legal representatives, and their future beneficiaries at risk.

Defining Digital Accounts and Assets

In 2016, the Uniform Law Conference of Canada (ULCC) adopted a uniform act regarding digital assets which defines digital assets 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”¹.

The difference between digital assets and digital accounts is important: while an asset typically refers to a singular file itself (such as a photo, email or word document), accounts generally refer to the mechanism used to control and access certain assets (such as a Facebook account, an email account, or an online banking account). Three main types of accounts have been identified: those containing (1) actual currency information (such as a Paypal or Bitcoin account); (2) virtual property (such as a Kindle or iTunes account); and (3) personal or commercial information (such as Facebook, email accounts, or LinkedIn accounts).

Current Law

While the ULCC’s uniform act has the potential to guide the development of digital asset laws in Canada, no provinces have yet implemented laws on the subject. As a result, if a party does not include a specific designation regarding digital asset management in their power of attorney, their legal representatives may find themselves restricted from accessing and managing these digital assets or accounts by a service provider’s privacy rules, or their terms of use. In these circumstances, attorneys for property may also have to consider questions of ownership rights to the asset in question, and potential jurisdictional issues with respect to privacy laws for the particular asset or account.

Powers Of Attorney, Digital Assets and Incapacity

One can help to protect against both financial and reputational damage by including provisions and information regarding the management of digital assets in their power of attorney. Some concerns may include:

• Depleting resources through online accounts: If an attorney for property is not advised of a party’s online accounts – such as a bank account, or an online gambling account – an incapable person could deplete significant financial resources without the attorney even realizing the damage being done
• Managing assets for financial value: An attorney for property must know the whole extent of a party’s assets and liabilities to effectively manage that property – if they are unaware of existing digital assets, the attorney may be unable to uphold their fiduciary obligation to manage those assets for the incapable person’s benefit.
• Sensitive correspondence: Parties may have emails, text messages, or blogs that are private, and that they do not want friends or family members to view or access.
• Inappropriate media sharing: In a state of incapacity, a party may be unable to discern between what is appropriate or inappropriate information to share on a social media website.
• Susceptibility to scams: Capacity issues may also increase a person’s vulnerability to online fraud, or scams.

It is key to ensure that an appointed attorney is adequately technologically savvy such that they can properly manage the digital assets in question. It may be appropriate to create a separate power of attorney, specifically with respect to giving power to a trusted and technologically literate representative to be responsible for one’s digital assets and online accounts.

In planning for one’s digital assets, one should consider the following factors:

• The extent of one’s digital assets and accounts;
• How to provide access of these accounts to their personal representative (e.g. through a regularly updated online account inventory and password bank)
• One’s personal preferences for how these assets should be managed in the event of incapacity (e.g. would one want their account shut down entirely, or preserved? Should some accounts, such as an online banking account, be shut down before others? Etc.)

An attorney for property should also be informed of any service providers who typically assist with a party’s technical issues, if one exists.

Conclusion

As our population continues to age, and more and more of our resources move and develop online, terms addressing digital assets in powers of attorney will only increase in importance. In today’s modern landscape, it is integral to thoughtfully consider these assets while capacity planning for the future.

If you are interested in learning more about incapacity planning considerations like this one, visit the Osgoode Professional Development website for information about upcoming programs.

^1.Uniform Access to Digital Assets by Fiduciaries Act (2016), Uniform Law Conference of Canada (Adopted August 2016). Presented at the Uniform Law Conference of Canada in Fredericton, New Brunswick.