Jurisdictional Conflicts and Digital Assets

In today’s world, more and more of our lives are connected to the digital space. We store photos online, use email daily, manage money through online banking, and some people even invest in cryptocurrency. These online accounts and items are called digital assets, and they are becoming a very important part of estate planning.

When someone passes away, their legal representative or estate trustee is responsible for managing what they owned and making sure their wishes are carried out. This process is already challenging with physical assets like houses, cars, or bank accounts. But with digital assets, the process becomes even more complicated because they often involve rules and laws from different countries. These conflicts are called jurisdictional conflicts, and they can cause major problems when settling an estate.

Understanding Digital Assets

Digital assets are online accounts and information that belong to a person. Examples include:

• Social media accounts (like Facebook or Instagram)

• Email accounts

• Online banking and investment accounts

• Cryptocurrencies, such as Bitcoin or Ether

• Online collections of music, movies or photos

Some digital assets have clear financial value, while others carry personal or emotional value. For example, cryptocurrency can be worth thousands of dollars, while a photo library may have little financial value but huge importance to a family.

The problem is that digital assets are usually stored on servers in other places around the world. This means that they may be controlled by companies in different counties, which often follow different rules. This can make it hard for Ontario estate trustees to access or transfer these assets after someone passes away.

Jurisdictional Conflicts

In Ontario, estates are usually managed under Ontario’s estate laws. But with digital assets, the situation is not always that simple. If a digital asset is controlled by a company outside of Canada, then the laws of that country might apply instead.

For example, the European Union’s privacy law, called the General Data Protection Regulation (GDPR), has very strict rules about access to personal data. Even if an executor in Ontario has the legal right to manage someone’s digital assets, the GDPR may block access unless specific conditions are met. This can cause delays, higher costs, and sometimes permanent loss of the assets.

Ontario’s Legal Framework for Estate Administration

Ontario has clear laws for managing estates, such as the Successional Law Reform Act (SLRA), the Estates Act, and the Trustee Act. These laws explain how estates should be handled, who can act as an estate trustee, and what powers they have.

However, none of these laws were written with digital assets in consideration. This is because they were created before the rise of the internet and digital technology. As a result, estate trustees often face unclear rules when it comes to accessing and managing online property, especially when foreign companies or laws are involved.

Ontario Case Law

Ontario courts have started to look at issues involving digital assets.

In Kirshenberg v. Schneider (2023), the Ontario Superior Court of Justice recognized that cryptocurrency held in digital wallets could be protected through interim orders. This shows that the court views cryptocurrency as important property, even though it has not been fully explained under Ontario law. Courts in the United Kingdom and British Columbia, however, have gone further by treating cryptocurrency as property for certain legal purposes.

Another case, Corvin v. The Shepherds’ Trust (2024), showed how the law of different countries can affect estate matters. In this case, Ontario law applied to a will made by someone living in Ontario, but Italian law applied to property located in Italy. This is important for digital assets, because their “location” is often difficult to describe. If an asset is stored on a server in another country, then that country’s laws may apply instead of Ontario’s.

Conclusion

Digital assets are now a normal part of life, but they also bring new challenges to estate planning. Because they are often stored in different countries, issues with conflicting laws are common. Ontario’s laws do not yet provide complete answers, and privacy rules in other places, such as the GDPR, can make things even harder. The best way to avoid problems is to plan ahead. By making a list of assets, leaving clear instructions, and getting professional advice, people can reduce the risk of conflict and ensure their digital legacy is safe. As technology continues to evolve, estate planning must evolve too, and digital assets should not be ignored.

To learn more or to book a consultation, visit www.yrusselllpc.com or call 416-499-7077/416-800-9891.