The Age of Digital Assets
A collage of from the artist Mike Winkelmann, better known as Beeple, has recently sold for $69 million dollars. This marks the first purely digital work of art ever offered by a major auction house. However, what was sold is not art in the traditional sense. There are numerous copies across the web of this collection, and you can view them for free here.
What was sold was a cryptographic certificate of ownership attached to the work, known as a non-fungible token or “NFT”. A digital ledger powered through the same block-chain technology which empowers cryptocurrencies, authenticates this certificate. NFT’s can attach to any type of digital posting, such as a tweet, a video, or artwork.
Winkelmann’s sale is far from an outlier. Artist and partner of Elon Musk, Grimes, has sold the NFT attached to her “War Nymph” collection of music, videos and art for $6 million. NFT market places have seen a huge recent boom. Overall, consumers have reportedly spent $174 million on NFT’s since November of 2017.
An NFT is only one example of the type of digital assets which have already permeated our everyday lives. There are social media accounts, loyalty points, treasure troves of e-books across a variety of platforms, and video game libraries on popular gaming platforms such as Steam, all with tangible dollar values. On average in 2011, people in the U.S. valued their digital assets at an average of $55,000.00.
Inevitably, the owners of these digital assets will pass away. What is to become of these assets if one’s will does not account for them?
Legislative Updates Regarding Digital Assets are Needed
Our courts are increasingly migrating to a digital platform. British Columbia made waves as the first Canadian province to permanently allow for electronic wills. Ontario is not far behind with changes to our Rules of Civil Procedure to allow for electronic commissioning, serving and filing of documents, as well as changes to allow for electronic filing of probate applications.
However, recent and upcoming legislative updates regarding Ontario’s estates law have been focusing on increasing procedural efficiency through digital means. They do not address digital estates asset planning.
In stark contrast, legislation in the United States leads the way when it comes to fiduciary rights regarding digital assets. Over 40 states have adopted the Revised Fiduciary Access to Digital Assets Act which governs access to a deceased person’s online accounts.
Why is this so important? When faced with these legislative gaps, and where a deceased person has not properly planned for their digital estate assets, trustees must turn to common law courts for assistance. These processes can be protracted, expensive, and lead to unpredictable results. The following are two unfortunate, cautionary tales.
Cautionary Tale #1: Apple Blocks Widow from Honouring Husband’s Dying Wish
Carol Noble of Toronto has gained media attention in her four-year legal battle with Apple over online materials which she already legally owns, but is prohibited access to.
Noble’s husband Don spent the last six months of his life confined to a bed as he battled cancer. He spent hours chronicling the progression of his battle on his Apple devices, hoping in the end to write a book with the materials. A few days before Don’s passing, he told Carol to finish the book for him. He went into a coma shortly after.
In his will, Don had not made plans for digital assets such as the notes to his biography. Without the password required to access his devices, Carol was prevented from finishing the book. Apple refused to provide this password as it would contravene a U.S. law: The Electronic Communications Privacy Act. Even though Carol had sent documentation to Apple including Don’s death certificate, and the will which designated Carol as the estate trustee, she was advised that this wasn’t enough. She would need a court order, which could cost thousands of dollars in legal fees.
Carol had no choice but to turn to a lawyer based in Toronto.
In the end, there was a happy ending. As of February 11th, 2021, Apple and Carol’s lawyer had reached a deal that would finally allow Carol access. However, Carol’s four-year battle could have been avoided either through legislation specifically addressing digital assets, or proper digital asset estate planning.
Cautionary Tale #2: Facebook Denies Mother Access to Deceased Daughter’s Account
In Germany, a woman had been engaged in a years-long legal battle with Facebook over access to the account of her daughter, who was killed by a train at a station in Berlin in 2012.
In this case, parents of the deceased did have the password to their daughter’s Facebook account. When they went to log-in in order to search for clues as to whether the death was accidental, the profile was inaccessible as it was put into “memorialised” mode by Facebook.
Citing data protection laws, Facebook refused to allow the woman to access her daughter’s profile, despite a Berlin court ruling in her favour in December of 2015. Finally, in 2018, Germany’s highest court for civil and criminal law ruled that parents can inherit the contract between their child and a social media platform, in the same way they would be able to inherit physical documents such as diaries and private letters.
The Takeaway
Over time, digital assets will only continue to be more important. Entire generations are growing up with social media as an inextricable part of their lives. Digital assets are no longer an exotic notion embodied by the likes of cryptocurrency.
In August of 2016, the Canadian Uniform Law Commission proposed the Uniform Access to Digital Assets by Fiduciaries Act, but it has yet to be adopted. This proposed legislation would allow fiduciaries such as estate trustees and substitute decision makers to access digital assets where the instrument empowering that fiduciary, grants them this power.
So until Ontario’s laws on the administration of digital assets are updated, it is best to err on the side of caution and follow best practices in making adequate estate plans for your digital estate assets.
