Use of Multiple Wills to Protect Against Foreign Tax Claims

June 12, 2007 Hull & Hull LLP Uncategorized Tags: , , , , , , 0 Comments

Today, it is quite common for Canadians to own property in the U.S. or other foreign jurisdictions. Having multiple Wills may help protect a testator’s Canadian assets from foreign tax claims, as illustrated in the British Columbia case of Barna Estate (1990), 40 E.T.R. 89 (B.C.S.C.).

In the Barna Estate case, the deceased died owning real property in Europe and substantial personal assets in Canada. The deceased had lived and died in France. She left two Wills. One was a French Will, dealing with her real property in Europe. The second was a Canadian Will, dealing with her cash, bonds and other financial assets in Canada. None of the beneficiaries under either Will were related to the deceased.

Under the applicable French law at the time, beneficiaries not related to the deceased could be liable to pay a 60% tax on the value of the deceased’s worldwide estate.

Canada Trust, the executor named in the Canadian Will, brought an application for the court’s advice as to whether it should pay all debt and succession duties in respect of property passing under both Wills, or whether it should only pay Canadian succession and death duties in respect of property passing under the Canadian Will.

There is a presumption that a testator’s intention is for the law of the jurisdiction in which she resided at the date of execution of a Will shall apply. In this case, the deceased was living in France at the date of execution of the Canadian Will, and according to the presumption, the Will should be interpreted in accordance with French law. However, the presumption is a rebuttable one, and the court ultimately found that the deceased had intended that her Canadian Will be governed by the law of British Columbia.

Once the court decided that the Canadian Will was governed by the law of British Columbia, the court had to interpret the payment of taxes clause in the Canadian Will. Given, among other things, that the deceased’s European property was specifically excluded from the Canadian Will, the court ruled that Canada Trust, as trustee, was only required to pay the death and succession duties in respect of property passing under the Canadian Will.

Have a great day!

Bianca La Neve

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