New Brunswick's new Fiduciaries Access to Digital Assets Act received Royal Assent on December 16, 2022. The new Act is the first of its kind in New Brunswick and makes the Province one of the few Canadian jurisdictions to have such a piece of legislation. The purpose of the Act is to provide a framework for individuals to plan what will happen to their digital assets upon death or incapacity.
This article is intended as an overview into this new Act and how it might impact residents of New Brunswick.
Introduction
Most people are probably unaware of the extent to which they hold digital assets and have given no consideration to what might or should happen to those digital assets upon their death or incapacity. Likewise, these individuals are probably unaware that they can plan for the disposition of these digital assets as part of their estate plan.
The Act allows a fiduciary of an individual to access the digital assets of said individual. Prior to the implementation of this Act, the law in New Brunswick, like much of Canada, was not clear as to the rights of fiduciaries nor the duties of those in possession or control of digital assets. As more and more people acquire digital assets, the lack of clarity was a genuine issue, which is where the Act comes in. The Act details the rights and obligations of account holders, fiduciaries, and custodians.
What is a Digital Asset?
The Act defines a digital asset as "a record that is created, recorded, transmitted or stored in digital or other intangible form by electronic, magnetic, optical or other similar means". Real world examples of digital assets include bank accounts, securities, insurance policies, email accounts, cryptocurrencies, audio or video files, eBooks, non-fungible tokens, gaming credits, loyalty points, and social media posts. These assets all can be stored in the cloud or on other personal devices such as a computer, laptop, phone, or other storage device. It is easy to imagine how a person could have various digital assets. The Act now makes it easier for a fiduciary to gain access to the assets and will assist them to fulfil their obligations in connection with the digital assets in the event of death or incapacity.
The person who would typically be understood as the owner of a digital asset is referred to as an "account holder". The person or entity that holds, maintains, processes, receives, or stores a digital asset is referred to as a "custodian". A core part of the relationship between the account holder and custodian is that there must be a service agreement. An example of this relationship would be an online service provider, but would not include most employers, as an employer and employee typically would not have a service agreement between them.
One point to note, for digital assets such as a bank account or securities held with a broker, is that this Act affects records concerning the bank account or securities but does not extend to impact the authority to engage in transfers of title or other commercial transactions, even though the transaction may also take place digitally. This Act reinforces the right of the fiduciary to access electronic communications and online accounts that show evidence of ownership or a similar right. It ensures that an entity may not refuse to provide the fiduciary with access to a digital asset anymore that they would for hard copies of records.
It should also be noted that this Act does not apply to an employer's digital assets that are used in the ordinary course of the employer's business.
Who is a Fiduciary?
A fiduciary is not limited to only the executors of an account holder's estate, but rather the definition is much wider. The Act provides that the following individuals are fiduciaries:
- a representative appointed for the account holder,
- an attorney for property appointed by the account holder under the Enduring Powers of Attorney Act,
- a personal representative, in the case of an account holder who is deceased,
- a trustee, other than a trustee in bankruptcy, appointed to hold a digital asset or other property of the account holder in trust, or
- any other person or class of person prescribed by regulation.
The Act further provides that a "personal representative" means an executor or administrator of an estate and a "representative" means a person who is appointed as or becomes a committee of the estate under either the Infirm Persons Act, the Mental Health Act, or the Presumption of Death Act. At this time there is no other person or class of persons prescribed by regulation.
As can be seen, this Act applies not only to those dealing with an estate or someone who is incapacitated, but rather it also allows a power of attorney or trustee to gain access to digital assets.
Powers and Rights of a Fiduciary
Section 3 of the Act gives a fiduciary the right to access the digital assets of the account holder. This right is subject to a few limitations, such as any instructions provided by the account holder in their will, letters of administration, court order, or other relevant instruments. Further, in the event of multiple instruments giving instructions, the most recent instrument is the prevailing one. If the service agreement provides provisions in relation to the account holder's digital assets, they will only be valid if those provisions were assented to on or after December 16, 2022, or by a separate act of affirmation.
The Act also confirms that the rights of fiduciaries for digital assets are subject to the same legal duties and limits that exist for tangible property. For example, the responsibilities of an executor when dealing with the typical personal property of an estate, such as an automobile, also apply to their dealings with digital assets.
A fiduciary is given the power to take any action concerning a particular digital asset that could have been taken by the account holder themselves. This might include accessing, controlling, and copying the asset. This right also extends to tangible personal property under a fiduciary's authority, which contains digital assets. An example of this would be a laptop or a cell phone, which the fiduciary already had authority over.
A final important note is that if a custodian acts in good faith in relation to this Act, they are immune from any action or proceeding against them.
Practical Implications
The law around fiduciaries' rights with respect to tangible property is well established, but prior to this Act, the law regarding digital assets was lacking. This Act allows people to have greater certainty and predictability that their fiduciary will be fully capable of executing their wishes. While an account holder may still wish to provide instructions or additional context to their fiduciary through their empowering instrument, such as a will, this Act ensures that not doing so will have no negative impact on their fiduciary.
While most applications of this Act will likely arise from an executor for account holders who are deceased, the Act also provides that a trustee or power of attorney are also considered fiduciaries. This allows for the Act to reach beyond deceased or incapacitated account holders, and it can be used for the benefit of those who are still alive and would otherwise be capable of managing such an asset.
For fiduciaries to make a request to a custodian, it should be in writing, and they will need to provide proof of their identity, along with documents confirming they are authorized to act, such as a will, letters probate, a court order, power of attorney or trust instrument. Following the request, the custodian has 30 days to provide the fiduciary with access.
It is important that lawyers engaging in estate planning on behalf of their clients be aware of the existence of digital assets and make every effort to ascertain their client's wishes in respect to the digital assets. Some may be content to leave the fiduciaries to distribute digital assets in accordance with their will, others may wish to leave a specific digital asset to a designated beneficiary.
Digital assets have value, sometimes it is a monetary value, other times it may be a sentimental value. This new and as yet not widely known Act is an important legislative framework establishing the rights and obligations of account holders, fiduciaries, and custodians vis-à-vis digital assets.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
