Estate Planning in the Global Village
We live in a global village. Today, more than ever, through the internet and jet travel, we are connected to people living all over the globe. It is not at all uncommon for Canadians to have parents living overseas, siblings spread across the continent, or children travelling for work or school.
Unfortunately, this presents challenges when it comes to estate planning that must be taken into account. These issues were the subject of a recent article in the Globe and Mail, republished on the website of Altro Levy LLP. The article highlights a number of considerations that should be addressed when dealing with an estate plan that crosses international borders.
One important issue that the article focuses on is taxation. Sorting through Canada’s tax regime can be complicated enough. When dealing with cross-border inheritance, the tax rules of the foreign jurisdiction need to be considered as well. Planning techniques which might be effective and prudent within our borders may go awry when assets are left to beneficiaries in other countries, leading to unexpected and undesired tax consequences.
The article also addresses practical problems that can arise when leaving assets in Canada to beneficiaries abroad. The article gives the example of a gift of a condominium in Canada which is producing rental income to a beneficiary outside the country. While the income will no doubt be welcomed, steps may have to be taken in Canada to effect a transfer of title and to manage the property thereafter. The rental income itself may cause international tax issues. Sometimes it may be simpler to have the asset sold and to distribute the proceeds directly.
Yet another concern is where an individual owns substantial assets in more than one jurisdiction. A foreign bank or other financial institution may not recognize the authority of the estate trustee of an Ontario Will. It may be advisable to prepare a will in each jurisdiction where there are substantial assets. However, revocation clauses, which are standard boiler-plate language in many Wills, may lead to the unintentional revocation of Wills in other countries. Careful drafting will be necessary to avoid problems such as this. As well, differences in the requirements of formal validity for Wills between jurisdictions can potentially lead to problems where, for example, different numbers of witnesses are required in different jurisdictions.
Estate planning can already be complicated and overwhelming. When considering the impact that the laws of more than one country may have on the planning process, it is easy to see that a testator may be well served by expert help. Legal advice from an expert at home, as well as in other jurisdictions should be sought in order to prevent some of these problems from arising. It appears that as the world grows closer together, we will need to plan carefully for the future.