Most Canadians have 150 online accounts. Will their treasures be lost when they die?
Are you encouraging your clients to address their digital assets in their wills and estate planning?
“Canadians are living more of their lives online and accumulating online accounts and digital assets,” Tracey Woo, vice-president of professional practice and tax for RBC Royal Trust told Wealth Professional. “But, dealing with them can be a bit daunting because, unfortunately, in Canada right now, there are no laws around who can access digital assets upon the death of a family member.
“To further complicate this issue, the terms of service that you click on when you sign up for Facebook or Google can make it very difficult for executors or family members to access any information stored on their sites without taking pre-planning steps prior to your client’s death.”
Woo said there is no universal legal definition for “digital assets”, but they include emails, digital photos, videos, and information stored in clients’ social media accounts. They also include cryptocurrency, loyalty points, and other intangible assets stored digitally.
She classifies digital assets in three categories. Family photos or videos, stored on clients’ Facebook accounts or in the iCloud, could have sentimental value. Cryptocurrency or loyalty points could have financial value. Executors or family members may also need banking or health information that clients have stored in emails or online to administer their estates.
Woo said a recent study showed most Canadians have about 150 online accounts. So, advisors can help clients start dealing with those by encouraging them to develop an inventory of all their digital assets. They can then close those they don’t need and identify what they want done with the rest.
Woo suggested clients identify five or ten key accounts to start and decide if they want them transferred or destroyed. Family photo albums or other key pieces of data, for instance, could be placed on a shared drive, hard drive, or iCloud so other family members can access them.
Clients could also use the online planning tools that some digital service providers offer. Google has an inactive account manager program that allows users to instruct Google, after a specified period of inactivity, to delete the data or share the account information it has housed with whomever the client holder names. That could include the client’s emails and photos stored on Google Drive. Apple has a similar program to provide legacy contacts with instructions to access a dead client’s accounts.
“It doesn’t have to be your client’s executor. It could be someone they trust to do what they wish with the data,” said Woo. “But, if they don’t do any pre-planning, it’s very difficult for their executor or family members to go back after they die to close those accounts. A lot of the assets, like cryptocurrency, that they may intend to pass along to their family members or accounts that they wish to close become very difficult for their loved ones to handle after their death.”
Woo recommended that advisors ensure their clients include digital assets in their estate plan. They can include a clause in their wills to specifically give their executors authority to access and administer their digital assets. The account information and wishes for the assets, especially for the top five or ten accounts, should then be communicated to the executors. She noted that RBC Royal Trust, as well as most online will providers, now have a standard clause to address that in their wills.
“I suspect that most estate lawyers are now including that clause, too,” she said. “But, it’s always worth asking and having that conversation to protect yourself.”
Woo noted that the Uniform Law Commission of Canada has been developing a legislative framework to provide fiduciary access to digital assets, but only Saskatchewan has adopted it since online service providers, like Facebook, are in California, so may not be subject to Canadian law.
“Putting legislation in place in each province is still a step in the right direction,” she said. “But, it’s going to require working with these big online service providers to get where we need to go for this to be administratively feasible.”
In the meantime, advisors can educate their clients about this because it’s still in the infancy stage.
They can also ensure their clients maintain their inventory, develop a robust plan to ensure their wishes for their digital legacy are fulfilled, and then communicate it to their family or executors.
“There may be assets of financial value that are locked away that your client’s executor or loved ones don’t know about or never find because that’s the challenge with digital assets,” said Woo. “Someone can’t come into your house and physically uncover them. If they’re hidden digitally, they may be hidden forever. So, there’s the potential loss of financial and sentimental assets if your clients don’t do this pre-planning.”