Most executors don’t think of themselves holding legal liability as a fiduciary, but there are risks that come along with the convenience of modern technology.
The cybersecurity risk for executors is very real and it presents a large source of potential problems that executors and advisors need to consider.
Cybersecurity: A Growing Concern for Canadians
We recently heard of a large data storage facility operator that suffered physical damage to its server facility. The accident was serious enough that it also defeated redundancy protections and clients lost their data as a result.
Despite being known as ‘the cloud’, most of us are aware that there is physical infrastructure behind these remote data management businesses.
There is always risk to client data, if not from physical damage then from security breaches caused by cyberattacks like phishing and malware.
66% of malware is installed via malicious email attachments.Verizon Data Breach Investigation Report
Business leaders routinely identify cybersecurity as one of – if not the largest – enterprise risk that keeps them awake at night. The business of insuring cyber risk for businesses of all sizes is still in its infancy as underwriters try to come to terms with:
- Definitions of cyber crime events
- Digital insurance agreements
- Exclusions and limitations that should apply to intrusions
- Privacy Breaches and theft of information and/or money
These cybersecurity issues don’t just apply to businesses.
Both advisors and executors need to consider this digital threat when planning and closing an estate.
What is the cybersecurity risk for executors?
Cybersecurity risks are not well understood by most people and underestimated by even more, as our society’s dependancy on technology lulls us into a false sense of security.
For example, we still see many small business operators – including legal professional – that communicate with us using free email accounts which may lack important security protection for transmitting sensitive business information.
How does this apply to Executors?
- Emailing sensitive information through non-secure email account.
- Storing important information on free cloud storage accounts hosted by a variety of vendors located at many points across the globe.
- An unauthorized intrusion through online banking and investment management that could compromise accounts (i.e. if a family member had access because they helped with their taxes.)
- Testator’s computer might have out-of-date software or no security software installed.
- Depending on how and where the Testator’s passwords were stored, they could be at risk of being compromised.
Final Thoughts on Cybersecurity
These questions come to mind:
- Is cyber security really any different than the expectation that an executor will protect physical assets in their estate home by changing the locks and controlling the keys?
- What is the executor’s legal liability for a security breach in his or her own or the testator’s digital account that results in a loss of estate value?
- Is it unreasonable to expect an executor, as a fiduciary, to take similar security precautions?
We haven’t seen any reports of estate litigation arising out of a cyber loss to date, but we expect it’s only a matter of time – and no one wants to be involved in the first major case.
Looking for more help?
- Official Executor Guide
- Will Preparation Guide
- Prepare Your Estate and Your Executor
- Executor FAQ
- Who should I choose as my executor?
- What happens to my estate if I don’t have a will?
- Can I include my pets in my will planning?
- What are my Executor duties in Canada?
- What will happen to our family cottage?