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Multi-jurisdictional Succession Issues Checklist

An increasing number of individuals have connections to more than one jurisdiction which can significantly affect their estate planning. In this Blog post, we explore a few special issues and considerations that need to be factored in estate planning to ensure a comprehensive and effective estate plan where there is more than one jurisdiction involved.

1. Consider one’s family background, habitual residence, citizenship, domicile and intended beneficiaries. In determining which law governs many succession issues, most common law jurisdictions apply the law of the deceased’s domicile if the assets involved are not real estate, and local law where real estate is involved. Other countries may apply the law of the country of nationality, or of habitual residence or domicile. Many jurisdictions allow for a choice of law in the will or trust agreement. It is critical to determine which law(s) governs succession to property.

2. Consider the matrimonial regimes which may impact and the ability to transfer property on death. For example, most civil law jurisdictions provide for some form of community of property. The spouse with title to property may not have full ownership of it if it is subject to community property rights, and may not have the right to effect a gift of all of the property in his or her name on death.

3. Establish whether local law will give effect to the terms of the will. Does it offend local law in any way? For example, most civil law jurisdictions do not allow for complete testamentary freedom and impose a required distribution of property on death among family members. Will one’s will be given effect in view of these entitlements, or result instead in a claim under the foreign law by the heirs to enforce these entitlements? Also, most civil law jurisdictions do not recognize the concept of a trust. This factor will have to be considered if the estate involves holding assets on trust where the property is located in a civil law jurisdiction. Will the trust be enforced, and how will the trustee’s rights to deal with the property be recognized? What alternative strategies are available?

4. Evaluate the relative advantages/disadvantages of using one will, versus multiple wills to dispose of assets on death in multiple jurisdictions.

5. Consider the tax treatment of the inheritance by one’s beneficiaries in his or her taxing jurisdiction and seek foreign advice with respect to structuring the inheritances.

6. Consider the tax consequences of holding assets in each jurisdiction, in conjunction with taxation based on one’s citizenship, nationality or residence or other affiliations and appropriate planning strategies.

7. Consider the advantages of “anti-probate” techniques to “rationalize” the holding of assets, streamline the administration of the estate, and minimize probate fees and multiple estate administration proceedings in order to restructure assets so they do not pass through the personal representative on death, including designation of life insurance policies, use of inter vivos trusts, joint tenancies and corporations.

8. Consider tax reporting and disclosure requirements and confidentiality/privacy issues.

9. Consider incapacity planning techniques. Will a continuing or durable power of attorney valid under the law of domicile/residence be given effect in the foreign jurisdiction? Consider the advantages of a continuing or durable power of attorney for each jurisdiction in which one holds assets. Also, consider other techniques for incapacity planning, such as trusts, including revocable or protective trusts.

As you will note, there are a number of special considerations that must be taken into account once a foreign jurisdiction is involved in one’s estate plan. In this Blog post, we have set out a few of them. It is important to ensure appropriate professional advice is obtained with regard to one’s individual circumstances. With increasing globalization of people and their property, these issues will only become more prevalent and important in future.

– Margaret O’Sullivan

The comments offered in this article are meant to be general in nature, are limited to the law of Ontario, Canada, and are not intended to provide legal or tax advice on any individual situation. Before taking any action involving your individual situation, you should seek legal advice to ensure it is appropriate to your personal circumstances.