As I said in my last blog, certain circumstances in either your background or asset base may mean your estate and Will planning requires some added attention.  One of those circumstances is ownership of assets in a foreign jurisdiction. 

With the real estate market being what it is in the United States, it is becoming increasingly the case that Canadians have an interest in real property in the United States.  However, other jurisdictions are also becoming more popular for Canadians.  For example, Mexico, various of the Caribbean islands, as well as spots in Europe.

Owning assets in foreign jurisdictions may subject you to taxes imposed by that jurisdiction. For instance, owning assets situate in the United States may cause the individual to owe U.S. estate taxes when you die.  (See some of my earlier blogs on this.)  Many countries in Europe impose an inheritance tax or a tax on ownership by non-nationals of real estate in their country.

Further complexities can arise if the legal regime related to the disposition of real property on your death differs from the legal regime where you reside.  For instance, Canada is a common law jurisdiction.  Many countries in Europe, as well as our own Province of Quebec, are civil law based jurisdictions. 

In most civil law based jurisdictions, there are what are referred to as “forced heirship” rights.  These rights are designed to ensure certain “heirs” receive a certain stipulated amount of your estate.  This is unlike a common law jurisdiction which is based on the concept of ‘freedom of testamentary disposition’.  (There are some exceptions to this ‘freedom’ but not of the kind applicable under a “forced heirship” regime.)  If “forced heirship” applies to the assets you own in a foreign jurisdiction, it may impact on to whom you can leave assets. 

In general, you might consider having a separate Will prepared to deal with assets located in a foreign jurisdiction. The reasons for this are as follows:

1. if the beneficiary also resides in the foreign jurisdiction direct distribution under a separate Will will be more efficient than using an administration governed by one Will;
2. a foreign jurisdiction may insist on compliance with its domestic law with respect to the validity of the Will and the administration of the assets, particularly in respect of real estate. If, for example, the law of the foreign jurisdiction requires three witnesses to a Will, a Will executed in Ontario with two witnesses may not suffice; and
3. the use of separate Wills may prevent the property in one jurisdiction from being applied in payment of taxes in another.

Stay tuned for consideration of other complexities in your Will planning.

Corina S. Weigl