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Considerations in Appointing Executors and Attorneys Out of the Jurisdiction

When considering your estate planning, an important decision is who will be your estate trustee responsible for administering your estate on your death, and as well who will be your attorney under a continuing power of attorney for property to manage your assets during your lifetime in the event that you become incapable of doing so. When choosing your estate trustee(s) and your attorney(s) under a power of attorney for property (your “representatives”), in addition to their relationship to you and their abilities, you may wish to consider where they reside.

If an estate trustee is not a resident of Ontario or a Commonwealth country, the Estates Act (Ontario) generally requires them to obtain an administration bond at the time of applying for a Certificate of Estate Trustee With a Will, also known as probate. As an example, while a bond may be required for a New York resident, it is not for a New Zealand resident. In practice, the amount of the bond is generally set at the value of the estate assets in Ontario. The court may dispense with the bond where it is not needed to ensure the estate trustee will fulfill their duties: for example, where creditors have been paid and there are no minor beneficiaries of the estate, and all of the beneficiaries are adult and agree, or the court may reduce the amount of the bond. Where a bond is required, the estate trustee obtains it from an insurance company that offers fidelity bonds and pays an annual premium for it.

Where the estate trustees or some of them are not residents of Ontario or Canada, the issue arises whether the estate will be a tax resident of Canada for the purposes of Canadian income tax law, and if so, in which province. A Canadian tax resident estate will be taxed on worldwide income from all sources, whereas a non-resident estate will generally only be taxed on certain Canadian source income, and be subject to additional reporting and withholding obligations. The Supreme Court of Canada has held that residence of a trust for Canadian income tax purposes is where its central management and control actually take place (see Fundy Settlement v. Canada, 2012 SCC 14). Where trustees meet and make their decisions, and where and how they manage trust assets among other factors are relevant.

There is no bonding or residency requirement for attorneys for property under the Substitute Decisions Act (Ontario). However, under applicable legal and regulatory requirements governing securities dealers, a Canadian investment advisor may be unable to take instructions from a non-resident attorney for property, including a U.S. resident. Depending on the situation, consideration should be given to appointing a Canadian resident attorney to perform investment functions under the power of attorney.

The choice of representative(s) is a personal one, however it is important to consider your representatives’ residence and plans for the future as one of the factors affecting your choice, and to discuss this issue with your advisors.

In our next post, we’ll discuss Powers of Attorney or equivalent in foreign jurisdictions and for foreign assets.

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. In particular, they are not intended to provide U.S. legal or tax advice. Before taking any action involving your individual situation, you should seek legal advice to ensure it is appropriate to your personal circumstances.

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