Perhaps I should refrain from re-stating the obvious, but it bears repeating–we live in an increasingly global and mobile society, where people move from jurisdiction to jurisdiction with relative ease. And when we’re not picking up and moving residences, we’re travelling to foreign destinations and buying property, opening bank accounts or acquiring other assets there. Then there are inherited properties abroad, or property held before the move to Canada.
All of this is good, or at least increasingly normal, and may speak to increasing affluence, but it can cause our families problems if we don’t take steps to properly plan for how these assets will pass to them after we die. One way problems can arise is the probate process in many jurisdictions, which can be extremely cumbersome, and can take up what seems like a lot of unnecessary time and additional professional fees, not to mention frustration, compared to the process in Ontario or other Canadian provinces.
Probate is the name colloquially and generally used to refer to the process by which an executor named under a will obtains the court’s confirmation that the will put forward is valid and the executor has the legal authority to administer the deceased’s estate under it. While it is often assumed that probate is necessary for all estates where there is a will, this is not the case in most, if not all, jurisdictions. Probate is only necessary where the holder of a particular asset or assets (such as a financial institution for a bank account) or the public registry which is in charge of title to the asset (such as the land titles system in Ontario for most real property) requires a court certificate in order to allow the executor to deal with the asset.
This brings us to one potential problem with cross-border assets–often an executor will not only need a probate certificate (called a certificate of appointment of estate trustee in Ontario) in the deceased’s home jurisdiction, but also any other jurisdiction where the deceased held property. This multiplication of probate certificates can not only multiply the time and expense normal to an Ontario probate application, but in some jurisdictions it can increase it exponentially.
For example, in some U.S. states, such as Florida, the court retains a supervisory role over an estate which is submitted for probate there. This means that, unlike in Ontario, where the court will only become further involved in the estate after a probate certificate is granted in certain specific and limited circumstances, a judge often oversees the executor’s administration of the estate and must approve the administration at its end. Also, the paperwork required to be submitted to the court is much more complex and extensive than that required in Ontario.
Other problems can arise due to procedural or documentary mismatches, such as if more than one jurisdiction requires the original will for probate. If assets are held in civil law jurisdictions, which includes most of Europe, the court rules governing succession may not be compatible with those in Ontario, creating more expense and complications. Probate in Ontario may be needed prior to probate in another jurisdiction, increasing the time the administration of the assets will take. And in some jurisdictions, such as many Caribbean countries, the court does not proceed with the same level of expediency as in Ontario, sometimes taking up to two years to process an application.
Fortunately, there are a variety of methods for planning to avoid the worst of, if not all of, these problems. Setting up trusts, including a revocable trust, to hold assets by trustees instead of directly, executing separate wills for each jurisdiction, joint ownership of assets, and other planning methods can, if appropriate in the circumstances and properly implemented, assist in making the administration of extra-jurisdictional assets much easier. Because of the potential pitfalls, such as income or transfer tax implications, proper and complete advice is necessary, but if you plan ahead, you can fly off to your vacation home in peace, knowing you aren’t setting your loved ones up for a crash-landing.
– Susannah B. Roth
Please watch for our next blog post on the use of protectors and others who have certain powers (e.g., umpires) in trust planning.
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.