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Globalization, Wealth Planning and the Mobile Client

The world is only getting smaller, not bigger.

Technological change combined with affluence has increased our connectivity. People are travelling more and increasingly buying foreign real estate and residing in different parts of the world for extended periods of time – often in warmer climates south of the border in the cold months, a cottage or country place in the warmer months, and a city place in between. Many of us study outside our home jurisdictions and pursue a variety of international business and employment opportunities in foreign jurisdictions, often leaving behind a chaotic trail of financial assets in different parts of the world.

Globalization has a major impact on wealth and succession planning by making it more complex than ever before. A purely domestic approach often fails to best serve the needs of mobile clients who need planning solutions that cross borders. Interesting planning challenges arise in a variety of circumstances: a child moves to the U.S. and minimizing exposure to U.S. estate tax becomes a concern; a retired couple purchases a vacation home in Arizona and local law will be primary; or a Canadian executive is seconded to Europe, taking up residence in a civil law jurisdiction such as France or Germany with very different laws. Further challenges arise where people move to Canada, bringing with them their citizenship and affiliations to other jurisdictions.

Prior to moving, it is important to understand the effect of the laws of the new jurisdiction. This is especially important where a couple moves to a community property jurisdiction from a common law jurisdiction without community property, or vice versa. Both regimes will impact and dictate what each partner owns and can transfer during lifetime or on death. An interesting fact is that almost one third of Americans live in a community property state where these considerations are critical. Or consider the implications where a couple moves to, or acquires assets, in particular real estate, in a civil law jurisdiction which has fixed rules governing succession to property on death often called “forced heirship”, as discussed in our July 16, 2013 blog post “New Harmonizing Rules for Cross-Border Succession in Europe and its Impact on Canadians”.

Globalization brings with it the need for our lawmakers to understand its impact and to work co-operatively to prioritize the harmonization of law across borders as a clear objective in itself. A parochial approach creates obstacles for those who need less, not more complexity, and more, not less uniform approaches for their basic estate planning.

In a globalized society where the virtual increasingly reigns supreme and people are more migratory, the reality is that geography and place are simply not as important as in the past.

As we sip our favourite summer beverage in a shady spot this summer, let’s mull that thought a little…

Watch for our next blog when we discuss compensation for fiduciaries. In the meantime, we invite you to view a series of videos we recently created on a variety of general estate planning topics, including “Estate Planning: An Empowering Journey”, “Thinking About Your Legacy”, “Your Unique Team”, “Estate Planning: An Organic Process”, “Death and Incapacity: The Big ‘Taboo’ Subjects”, “Living Longer”, “Choosing Your Decision Maker” and “Losing a Loved One: First Steps”, which we hope you will find helpful and informative.

– 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 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.