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“That’s It – We’re Moving to Canada!” Leaving Assets Abroad: Estate Administration Issues

A few weeks ago, Google reported an increase in the number of searches on how to apply for Canadian residency and citizenship. Surprisingly, these numbers may not just be from our friends south of the border: in 2019, Canada welcomed over 284,000 people worldwide. This statistic is not unique to Canada; the number of people moving around the world continues to increase. The UN’s World Migration Report 2020 stated that just this past year alone, there were approximately 272 million international migrants worldwide, with the majority (almost two-thirds) moving for economic opportunities.

When someone is packing up to move to another country, whether it be for work, education, family, or maybe just a new adventure, in addition to leaving behind their friends and families, it is not uncommon for ex-patriots to leave behind a trail of assets, which can cause significant problems for their executors upon death.

In today’s blog post, we will briefly look at a few of these common pitfalls. For the purpose of this post, we will assume that although a person may have forgotten about a bank account in Barbados or inherited a farm in France, they died living in Ontario with primarily Ontario assets, and prepared an Ontario Will.

The most common problem that arises is the potential requirement for probating their Will in more than one jurisdiction. Generally, in Ontario an executor receives a grant of probate by the court in order to confirm their authority as executor of the estate and the validity of the Will.

The probate process can be timely and costly – in the Toronto court, for example, it currently can take more than 6 months for a grant of probate to be issued, and the estate needs to pay approximately 1.5% of the value of the deceased’s worldwide assets in Ontario Estate Administration Tax (with some exceptions).

When there is an asset located outside of Ontario, the Ontario executor will need to follow the rules of that foreign jurisdiction to determine the requirements to grant the executor this same authority. This could prove especially challenging if the foreign jurisdiction doesn’t allow for a non-resident executor or requires a bond to be posted as security.

In such cases, the Ontario executor may have to seek out and appoint a resident in that jurisdiction to act as executor. Trying to find someone to act on their behalf and to assist them in navigating the rules in a foreign jurisdiction will ultimately increase the time it takes to fully administer the estate, in addition to increasing overall costs. This extra time and money doesn’t even take into account the practical challenges of potential language barriers, time differences, and in today’s COVID-19 climate, travel restrictions.

Another potential pitfall is that the type of asset and where it is situated could dictate how an asset may be gifted on death. In many civil law jurisdictions, forced heirship may apply, and the law will dictate a mandatory scheme for distribution of an estate among family members, effectively overriding the testamentary freedom which applies in Ontario. Similarly, the executors will need to confirm the laws of the country in which the asset is situated to see which law governs the validity of the Ontario Will.

This could be particularly problematic as some countries may not recognize certain gifts made in an Ontario Will, a common example being that many civil law jurisdictions do not recognize the legal concept of a trust, including a testamentary trust under a Will.

Finally, it is no surprise that no matter where you may live, taxes are a certainty of life. When a deceased has assets abroad, the Ontario executors are responsible for ensuring any tax obligations for which they are liable are settled and all tax filings are taken care of. This will involve obtaining tax advice in that jurisdiction, and may also unfortunately lead to double taxation in the absence of any tax treaty between Canada and the country in which the asset is located in.

This is a brief look at only some of the problems that could arise when a person dies owning assets in multiple jurisdictions. Many of these pitfalls can be avoided by proper planning, and not only taking the time to seek out professional advice in each jurisdiction there is a connection to, but letting advisors know of all global ties so that they can work together to prepare a comprehensive plan.

Even better yet, a lot of these traps can simply be avoided by consolidating assets and the “chains of ownership”, rather than leaving a trail throughout the world. When you are on the move, perhaps the only things you should leave behind are your fond memories!

If you are interested in learning more on multijurisdictional planning and estate administration, please be sure to check out our recent Client Advisory on Mulrijurisdictional Estate Administration Highlights as well as our multijurisdictional succession issues checklist [recently updated], Key Succession Issues for the Multijurisdictional Estate.

— O’Sullivan Estate Lawyers

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.