What happens to my online accounts and assets after I am gone?

Estate planning
Matters Beyond Wealth

As our digital footprint continues to expand, learn how to address how those digital assets are handled after we’re gone

“It’s estimated actually that today the average Canadian has between 100 to 150 online accounts open, which is a lot to manage during your lifetime, let alone after death.”
Tracey Woo, Vice-president of Professional Practice and Tax at RBC Royal Trust

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Transcript

Intro Speaker:  

Hello, and welcome to Matters Beyond Wealth with your host, Leanne Kaufman, president and CEO of RBC Royal Trust. For most of us, talking about subjects like aging, late life, and estate planning isn’t easy. That’s why we’re going to help get the conversation started on this podcast while benefiting from the insights and expertise of some of the country’s top experts. We want to bring you information today that will help to protect you and your family in the future. Now, here’s your host, Leanne.

Leanne Kaufman:

Digital access can touch nearly every activity in the world. The digital experience now impacts the way we shop, the way we stay in touch with family and friends, the way we consider art and the way we manage our finances. As our digital footprints continue to expand, estate planning also has to keep up to address how these digital accounts and assets are handled after we’re gone.

Digital assets refer to any record that is stored in digital form. This includes your email, your photos, social media accounts, reward points, cryptocurrencies, non-fungible tokens, and intellectual property such as unpublished literature, digital art, or domain names, and so much more. Digital assets often have some degree of value, whether monetary or sentimental. And while these things have simplified our lives in many ways, they have definitely complicated our estates upon death.

Hello, I’m Leanne Kaufman and welcome to RBC Wealth Management Canada’s Matters Beyond Wealth. With me today is Tracy Woo, Vice-president of Professional Practice and Tax, and one of my close colleagues here at RBC Royal Trust. She leads the technical, legal and tax expertise for trust and estate matters, as well as a team of in-house accounting and tax professionals. Tracy has a law degree from Osgood Hall Law School in Toronto, and amongst her many other accomplishments relevant to today’s discussion, she’s a member of the steering committee of the Global Digital Assets Special Interest Group with STEP, the Society of Trust and Estate Practitioners. Tracy, thanks for being here with me today to talk about digital assets and why they matter beyond wealth.

Tracy Woo:

Thanks for having me, Leanne.

Leanne Kaufman:

So how do you describe digital assets? I know I gave a bit of a laundry list there at the beginning, but in the context of estate planning and administration specifically, how do you describe digital assets?

Tracy Woo:

So, there’s no legally agreed upon term as to how digital assets are described for estate planning administration purposes, but as you had already mentioned, digital assets are essentially any electronic record in which an individual has a right or interest. Now, I like to think of digital assets when it comes to estate planning administration as three separate buckets or categories.

The first bucket includes digital assets with financial value. So those are digital assets that include crypto assets to accounts with financial value like PayPal accounts and online gaming accounts, as well as online business assets like domain names.

The second bucket would include digital assets with sentimental value. So that would include things like photos and videos, messages that are stored on social media or cloud accounts.

And the third bucket includes digital assets that provide access to information and records about other underlying assets. These would include emails and email accounts or online banking records or medical records.

Leanne Kaufman:

So honestly, when I start to talk to people about this and how they have to deal with digital assets as part of their estate planning, they’re often pretty dismissive at first and they think it’s either completely irrelevant to them or somehow inconsequential to their estate. So why do you think Canadians need to create a digital legacy as part of their estate plan?

Tracy Woo:

You might assume that if you don’t invest in cryptocurrency or if you don’t work as a blogger or a social media influencer that there’s no need to create a digital legacy plan, but that’s just simply not true in 2023. The reality is that today everyone needs a digital legacy plan because so many aspects of our lives that once involved the physical exchange and storage of tangible documents and records, that’s all done electronically and online today. Your email account, for example, likely has a lot more important information and records stored than your physical home office today. And if you’re using social media or transacting online, either shopping online or accessing personal records online, you’ll need a digital legacy plan because without one, it’ll be very difficult for your executor to access all the information required to fully administer your estate. Let alone being able to locate, access and distribute any digital assets of financial value and sentimental value to your loved ones.

Another reason it’s important to have a digital legacy plan is to ensure that your executor is able to properly close all of your online accounts after you’ve passed away in order to prevent fraud. Not only would a cyber hacking incident negatively impact the administration of your estate and potentially result in financial loss if say an account linked to a bank account or credit card is compromised, for example, but theft of personal information or identity theft would also be very problematic for an estate administration, not to mention extremely traumatic for family members and loved ones during an already difficult time.

Leanne Kaufman:

When you think about what we might’ve once considered going and doing a physical search through the file cabinets and through the bookshelves and that kind of thing of someone, now it’s more likely you have to go on an excavation of the email account, right? And how tricky is that going to be if you don’t even know how to access that email account?

So what are some of the pitfalls that you are seeing when it comes to trying to deal with digital assets after someone passes away?

Tracy Woo:

There are a few pitfalls, or rather obstacles, executors are faced with when it comes to administering digital assets after someone passes away. One of the main reasons for this is that the legislation governing the area of death, digital assets and judiciary access is still very much in its infancy stage in Canada as well as in other jurisdictions. And because of this, even with careful planning, it can be difficult for executors and loved ones to gain access to a person’s digital assets after death. One of the complicating legal factors is that digital assets are typically housed on a digital service provider that’s governed by its own terms of service, which is essentially a contract between the account holder and the digital service provider. And it’s that terms of service agreement that sets out what happens to an account holder’s account on death.

Leanne Kaufman:

By terms of service, you mean like that thing that we all just scroll through and click I accept without reading?

Tracy Woo:

That’s right. The 10 pages they ask you to tick through before you open your Instagram account or your new meal planning account, that’s exactly what it is. And so although these terms of service are unique to each provider, they generally won’t allow an executor to access any of the records or digital assets of the account holder without a court order from the jurisdiction where the service provider operates. And typically these, what I call DSPs or digital service providers, are governed by laws outside of Canada, which for Canadians further complicates things from a legal perspective because it makes trying to obtain access very expensive and time consuming.

Another obstacle executors are faced with when trying to administer digital assets includes the fact that, and you just alluded to it, Leanne, in one of your comments earlier, but it can be very difficult for executors to locate and identify digital assets if they aren’t made aware of their existence to begin with. Just imagine your executor having to search different pieces of hardware, different multiple laptops and tablets and smartphones, and then sift through different email accounts with hundreds of emails in order to locate digital assets if no directions have been left by the deceased. And that’s only assuming they even have access to the deceased’s hardware and email accounts.

Leanne Kaufman:

You can’t even get into it, right?

Tracy Woo:

Exactly.

Leanne Kaufman:

So much encryption now and security for good reasons.

Tracy Woo:

Finally, I wanted to just mention crypto asset administration just because it has its own unique risks and pitfalls. So when it comes to cryptocurrency, not only will the ability to obtain access differ depending on how the crypto is stored—so depending whether it’s stored an exchange or a hot or cold wallet. But cryptocurrency in particular has to be safeguarded and liquidated as quickly as possible in order to protect them from potential theft as well as investment risk given their volatile nature.

Leanne Kaufman:

I’m not even going to ask you to explain what a hot or cold wallet is. That’s a podcast for another day, I think.

It’s really counterintuitive though, isn’t it? Back to your initial comments around the terms of service governing this, it kind of flies in the face of everything we’ve always understood about the power that an executor has to step fully into the shoes of a deceased and do whatever the deceased could do and have full access. We’re now faced with these roadblocks that are really kind of new and all because of the contract that we unknowingly sign every time we open one of these accounts.

Tracy Woo:

Absolutely, and some of this also stems from the fact that there’s this tension between protecting the account holder’s privacy and then obviously the common law principles around what the executor has a right to access and administer. But these are, I think, all the pieces of legislation and law that need to come together to work as one in order to iron out some of these challenges. There’s also a conflicts of law issues as well that applies or that needs to be, I think, resolved because a lot of these digital service providers, as I’d mentioned before, many of them are in California, and so there’s multiple jurisdictions that we’re working with as well.

Leanne Kaufman:

Yeah, we just haven’t kept up. We haven’t been able to keep pace with the changes that have gone on from an estate perspective.

So, what are some things that we should be considering when we’re doing our estate planning that we probably didn’t have to think about 15 years ago? And what are some really practical steps that you think listeners can take to help ensure that their digital legacy is handled in the way they would want it to be?

Tracy Woo:

One of the important considerations today that we didn’t think much about in estate planning in the past is the importance of ensuring that your Will includes a specific digital assets clause that gives your executor express and broad powers to access and manage your digital assets after you pass. The good news is that this has really become fairly standard practice to include such a clause in your Will for estate lawyers as well as for online Will providers today.

Another consideration that’s evolved in recent years is in relation to the skill sets required of an executor today. When deciding who to appoint as executor, it’s now important to also consider whether this person has some digital and technological acumen. And given the unique expertise required to administer digital assets, one could also consider appointing a separate digital executor with this required expertise. This person could be a different person from the person appointed to be the, I guess, traditional executor of the rest of your estate. This person would only be responsible for facilitating the administration of your digital assets.

Now, by appointing a separate digital executor, you’d have to ensure that this person appointed is someone who’s able to work collaboratively with your main executor to ensure that they can provide any information or documentation required by the executor to administer your estate and file your tax returns, for example.

In terms of practical recommendations, there are a few key steps you can take to help ensure that your wishes with respect to how your digital assets are handled at death are fulfilled. The first step in any digital legacy plan is to take an inventory of all the digital assets you own and commit to reviewing them and cleaning house on a regular basis.

Leanne Kaufman:

That sounds like a moving target.

Tracy Woo:

It is because it’s estimated actually that today the average Canadian has between a hundred to an 150 online accounts open, which is a lot to manage during your lifetime, let alone after death. So in creating this digital asset inventory, it’s important to assess whether all of the accounts you have open are still in use, what accounts hold assets of value to you, and what accounts should be closed down if they’re no longer being used or needed.

Then for the top five to 10 digital assets of value to you, carefully document where they’re stored, how you want them treated at death, along with other important details like how they can be accessed. And in this regard, it’s important again to review the relevant terms and conditions to ensure they can be transferred or disposed of as you wish at the time of death.

Now, with all these accounts, there’s a whole debacle around how you manage passwords. So one could consider making use of a password manager that allows you to manage and store the passwords of all of your accounts securely while enabling you to access all of your accounts with just one master password. Password managers, if one is using such a service provider, can also be an important part of your digital legacy plan because they generally include some kind of mechanism that allows family members or third parties to access your account on death.

Lastly, I would take advantage of the growing number of online legacy tools that are being offered by a growing number of digital service providers. So for example, Apple now has Legacy ID. Which allows users to add a legacy contact to their Apple ID, and that allows the legacy contact to access the data stored in one’s Apple account after they pass away. Similarly, Google has an active account manager that allows users to name a person to access content on one’s Google account after a certain period of inactivity. These tools in 2023 are probably the best way to ensure that any digital assets housed on these accounts will be transferred, destroyed, or wound up as you wish upon your death.

Leanne Kaufman:

There was that very publicly told story a few years ago about the iCloud holding photos of a young father who had passed away and he had, I think a two-year-old daughter at the time, and his wife wasn’t able to access any of the pictures because he hadn’t put this legacy in place. If he had done that legacy protector through Apple, would she have been able to access those photos and give her daughter access to the pictures of her father that she’s not going to remember otherwise?

Tracy Woo:

Yes, he would’ve. And I think this legacy tool actually came out shortly after that case because for years and years, and I think there’s been quite a few cases on this, there just was no legal mechanism to allow a family member to access these treasured photos and videos on Apple accounts. So this was really Apple’s solution to that while balancing the holder’s privacy, because the tool can help you also restrict what is available and what is to be destroyed on death because there are obviously account holders who don’t want anything shared that’s sitting on their account. And so it’s that tension that these digital service providers have to balance.

Leanne Kaufman:

There’s a lot of information we’ve shared here today, and some people might want to follow up and dive a little deeper into some of these tools that you’ve mentioned. Where can people go to learn more?

Tracy Woo:

STEP or the Society of Trust and Estate Practitioners. It’s a global professional body of estate and trust professionals. STEP has a special interest group focused on thought leadership in the digital asset space. So this special interest group has developed lots of great educational resources and estate planning and administration on digital assets. For access to these resources, you can go to http://www.step.org to access the Digital Assets Hub.

Leanne Kaufman:

I think that’s a great resource for people to start because this is one of these areas where you don’t know what you don’t know.

So, Tracy, if you hope listeners just remember one thing from our conversation, what would that one thing be?

Tracy Woo:

So, if there’s one key takeaway for listeners today, it’s that a digital legacy plan is an important part of every estate plan for everyone today. Without a plan in place, it’ll be very difficult, if not impossible, for your executor to fully administer your estate and fulfill your wishes on how you want your digital assets handled at death.

Leanne Kaufman:

Thanks, Tracy, for joining me today to talk about some of these considerations and certainly complications of digital assets in estates and why this matters beyond wealth.

Tracy Woo:

It was my pleasure. Thanks for having me.

Leanne Kaufman:

You can find out more about Tracy on LinkedIn, and if you enjoyed this episode and you’d like to help support the podcast, please share it with others, post about it on social media, or leave a rating and review. Until next time, I’m Leanne Kaufman. Thank you for joining us.

Outro speaker:

Whether you are planning for your own estate, the needs of your family or business, or you are an executor for a loved one’s estate, we can help guide you, simplify the complex, and support your life’s vision. Partner with RBC Royal Trust and ensure your legacy will thrive for generations to come. Leave a legacy, not a burden™. Visit rbc.com/royaltrust.

Thank you for joining us on this episode of Matters Beyond Wealth. If you would like more information about RBC Royal Trust, please visit our website at rbc.com/royaltrust.


RBC Royal Trust refers to either or both of the Royal Trust Corporation of Canada and or The Royal Trust Company. RBC Royal Trust and RBC Wealth Management are business segments of the Royal Bank of Canada. Please visit https://www.rbc.com/legal for further information on the entities that are member companies of RBC Wealth Management.  ®/TM Trademark(s) of Royal Bank of Canada. RBC and Royal Trust are registered trademarks of Royal Bank of Canada. Used under licence. © Royal Bank of Canada 2023. All rights reserved.

This podcast is provided for general information purposes only and is not intended to provide any advice or endorse or recommend any content or third parties referenced in this publication. A professional advisor should be consulted regarding your specific situation.  While information presented is believed to be factual and current, its accuracy is not guaranteed and it should not be regarded as a complete analysis of the subject matter discussed.


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