For many, borders between home and foreign jurisdictions increasingly matter less and are easily overlooked when acquiring new assets, like a second home in another country and bank accounts and other financial assets. Updating your estate planning to reflect the new status quo of foreign asset ownership, however, doesn't always keep pace and is often an afterthought. Multijurisdictional wills and separate situs wills--important yet underused planning tools for an effective and comprehensive estate plan--help streamline and add greater certainty to administering an estate with foreign assets.
You may find yourself named the executor of an estate with foreign assets in the will of a friend or family member. While at first it may seem a daunting task to administer, with good advice and careful consideration this challenge can be successfully met. This post will briefly highlight a few special issues to think about when an estate has foreign assets--particularly those where no special planning was done by the deceased prior to death.
1. Will probate or a similar court or legal process be required in the foreign jurisdiction where the deceased held assets in order to manage and administer them? Obtaining probate in a foreign jurisdiction can be involved and costly, often requiring consecutive and multiple administration proceedings. If two or more common law jurisdictions are involved, it may be necessary to obtain a further grant of probate of the will in the other jurisdiction. If assets are located in another Commonwealth jurisdiction, "resealing" may be available from the local court to confirm an executor's authority to act--essentially giving effect to the original Commonwealth jurisdiction's probate grant in a simplified process. Civil law jurisdictions, on the other hand, generally do not require probate. Instead, if the inheritance is accepted, the heir(s) generally step into the deceased's shoes for assets and debts.
Before embarking on the probate process, consider where the best place is to first probate. Requirements to secure a grant of probate may also vary. For example, a person resident in Canada may not be able to act in a foreign jurisdiction, or a fiduciary monetary bond may need to be posted with the local court before he or she will be qualified to act.
2. Which law governs succession of a foreign asset? Depending on its nature, it may be the asset's location, or the deceased's habitual residence, citizenship or domicile that determines this issue. Does the will choose the law to apply to the foreign asset? If the death occurs after August 16, 2015 and foreign assets are located in an applicable EU member state, a new provision called the Succession Regulation may also impact administration.
3. What local laws may affect the terms of the will and the administration of the foreign assets? Most civil law jurisdictions (e.g., France) do not permit complete testamentary freedom and impose a required distribution scheme for property among certain family members--often called "forced heirship". There may also be matrimonial laws that affect or limit the transfer of the property, such as for California and other community of property jurisdictions.
4. What tax and reporting requirements arise in the foreign jurisdiction and how do they impact the estate's administration in Ontario?
5. Are there creditors in the foreign jurisdiction and how will they affect the overall administration of the estate?
6. Is it necessary to appoint agents under a power of attorney to be physically present in the foreign jurisdiction to carry out certain actions on the executor's behalf?
While administering an estate with foreign assets may present greater challenges and complexity (as well as longer timelines), with experienced counsel who can navigate the process and well-qualified advisors in the local jurisdiction, including lawyers and tax advisors, a coordinated, well-thought approach can be implemented. With increasing globalization comes as well increasing complexity, and the need to successfully rise to these challenges in whatever sphere one operates--including estate administration.
Please watch for our next post on ethical wills.
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.