Today’s blog post was written in collaboration with Adele Ambrose – Student-at-Law at Fasken.
This is the second part in a two-part blog series that explores the specific client considerations for digital assets in estate planning. In Part I, we took a look at the digital assets landscape in Canada and examined the legal considerations (and barriers) for managing digital assets in estate planning.
From an estate planning perspective, while understanding the actual legal treatment of a client’s property vis-à-vis their estate is important, client considerations—including who they are, what they do, and the attributes of their property—are equally important to understand. These principles, in the digital assets context, are the focus of Digital Asset Entanglement: Unraveling the Intersection of Estate Laws and Technology by Sharon Hartung, P.Eng. and Jennifer Zegel, Esq.
Specifically, Digital Asset Entanglement highlights six distinct “client user personas”. Advisors can expect that a client who owns digital assets may fit into one or more of these personas. Understanding these personas is critical to putting together an effective estate plan for clients from both a legal perspective and a technological hygiene perspective.
What follows is a high-level overview of these six client user personas, as well as some commentary on specific considerations for each.
- Basic Users
The profile of a Basic User is fairly standard. The Basic User owns digital assets for personal purposes such as managing a household (e.g. paying bills), purchasing products online and paying for entertainment (e.g. Netflix, Spotify). The Basic User does not leverage digital assets for economic gain.
Other typical characteristics of a Basic User include:
- relying on email for communication as well as record retention;
- utilizing social media for communicating with friends/family;
- storing photos on social media platforms, photo storage platforms and/or mobile devices (and capturing photos on such devices); and/or
- employing video conferencing software (Zoom, Microsoft Teams) for business or social interaction; and
- participating in loyalty programs (points, gift cards, online apps/accounts). It should be noted that any unclaimed financial value may or may not be transferrable upon the user’s death.
Most people are at the very least Basic Users and thus these types of digital assets will come up frequently in clients’ estate planning. Therefore, having a baseline understanding of these digital assets will become increasingly critical.
- Super Users and Tech Support
These users are individuals with at least a moderate technical ability. Family or friends may rely upon them to provide technical support work. Sometimes they may have traditional information technology jobs. They may also control and administer the online presence of charities, community groups and small businesses.
Super Users and Tech Support may actively be:
- setting up and running websites;
- managing social media accounts;
- granting and/or denying access to forums; and/or
- with respect to web domains—which can be particularly valuable digital assets depending on the domain (e.g. www.apple.com) —registering the web domain.
Super Users and Tech Support may own or manage digital assets with a far higher level of complexity than those of Basic Users. Any advice to such users will have to account for such complexity.
- Gaming and Entertainment Users
The profile of Gaming and Entertainment Users includes video gamers, online gamblers and fans of sports gaming. Primarily, their digital assets will include content (e.g. skins, hats etc.), tokens and/or digital currency facilitated by their online games that that they’ve purchased or earned.
In assessing Gaming and Entertainment Users’ digital assets, advisors should consider the following:
- fiat currency may be held in third-party payment platforms for future online purchases;
- some gaming and gambling websites may have cryptocurrency accounts; and
- currency and/or content for one particular game may only be usable with respect to that particular game.
It is possible that digital assets of Gaming and Entertainment Users’ may have significant financial value. Advisors should work with their clients ensure that all such content, tokens and/or digital currency (or fiat currency if applicable) stored in association with a game is accounted for.
- Digital Platform Economy Users
The profile of Digital Platform Economy Users are clients who use applications and websites for commercial purposes. Accordingly, Digital Platform Economy Users typically use the internet for financial transactions, selling goods and services, and short-term or contract-based work.
Canada Revenue Agency has identified four types of platform economies:
- Sharing economy: Using personal assets to earn revenue (e.g. Airbnb (accommodation), Uber and Lyft (ridesharing))
- Gig economy: Short-term or contract-based work (e.g. Clickworker, Crowdsource and Fiverr)
- Peer-to-Peer: Selling goods and services from one person to another (e.g. Etsy, eBay, Amazon, Kijiji, Shopify and Alibaba)
- Social media (or social influencer) economy: Using engaging social media content to earn advertising revenue and paid subscriptions (e.g. YouTube, Instagram, Twitch, Facebook, Twitter and TikTok)
One key question to ask with respect to a Digital Platform Economy User is whether their digital assets may continue to generate revenue after their death. This can have a significant impact on the structure of their estate plan.
- Small Business Owners and Content Creators
This profile includes the traditional small business owner as well as independent consultants, contractors, content creators, project managers, writers, editors, and other individuals who are self-employed, sole proprietors, in partnerships or otherwise earning income from commissions. The key difference between these users and Digital Platform Economy Users is that the former generates revenue without the use of any ofthe platform economies identified above. In other words, if a Small Business Owner’s business has a digital aspect to it (e.g. a website), then there will be unique considerations for that user’s estate planning.
A key challenge to overcome for Small Business Owners and Content Creators, particularly from a technology management perspective, is how to differentiate between technology and digital assets geared towards personal use from those geared towards business use. Some clients use the same technology and digital asses for both purposes, which can also have other issues (e.g. cybersecurity and privacy). Users who blend their personal and business affairs will require careful investigation and navigation.
- Tech Innovators and Nomads
The profile of Tech Innovators and Nomads are clients who are tech-forward and heavily involved in the emerging technology space. They are often quite exposed to blockchain, cryptocurrency, non-fungible tokens, artificial intelligence and other new technologies. As their name suggests, Tech Innovators and Nomads often live the majority of their personal and professional lives on the internet, and physically may not be tied to any one particular location.
The biggest challenge with estate planning for Tech Innovators and Nomads is that they may own digital assets that the law has not even recognized yet. Working with Tech Innovators and Nomads may require a high degree of learning and creativity with respect to their unique situations.
Again, this blog post provides a high-level overview of the relevant client user personas. Digital Asset Entanglement goes into far greater detail on these client user personas from both a legal and technology hygiene perspective. The key takeaway is that many advisors may have to step outside their comfort zone and engage with concepts that are novel to them in order to ensure that their clients’ digital asset estate plans are structured appropriately.