This Blog was written by Emily Racine, Estate and Trust Consultant with Scotia Wealth Management
When it comes to estate planning, the cases where all property and beneficiaries can be found within a 10km radius are increasingly becoming few and far between. More and more estates cross not only provincial borders but international borders as well. These estates carry their own set of complexities and require their own set of steps. Here are a few of the common scenarios that we see where international borders can throw an estate plan for a loop.
With families crossing international borders, it is more and more common for an individual to be named as the executor of an estate where the executor lives in another country than the deceased. This can present significant practical challenges. It can also create some added taxation complexities. Here in Canada, having a non-resident executor can mean that an estate no longer qualifies for the preferential graduated rates of estate tax. These tax hurdles are over and above the practical consequences of trying to administer an estate from a different country. Naming a non-resident executor can, therefore, have expensive consequences.
Property in Multiple Countries
It is also becoming more common that the assets of a deceased are not all in one country. Individuals can have a vacation property in Florida or Arizona, for example. We also see family property inherited in many European countries become part of a Canadian estate. Further, with so many international moves, clients may have pensions or investment accounts in multiple countries worldwide. This requires an executor to take those extra steps of dealing with foreign jurisdictions to release those assets into an estate. This can involve hiring agents on the ground in multiple countries. Dealing with multiple jurisdictions certainly increases the time, complexity, and expense of administering an estate.
Beneficiaries in Multiple Jurisdictions
Finally, estates frequently have beneficiaries in multiple countries. While this is the easiest of the three scenarios, it still does come with extra steps. The first, and sometimes most difficult, is locating beneficiaries overseas. If an executor cannot find contact information for a beneficiary but knows they live in another country, that executor is responsible for taking reasonable steps to track that beneficiary down. Even if the locations of all beneficiaries are known, non-resident inheritors may require extra due diligence on the executor’s part due to anti-money laundering rules in place internationally. Finally, a beneficiary of an estate in a different country may have their own tax consequences to worry about. While Canada does not directly tax an inheritance, this is not the case in other countries and beneficiaries need to be aware of their own obligations when receiving funds from oversees.
Our increasingly globalized world is, as outlined above, creating greater complexities for executors and beneficiaries. When putting together an estate plan, testators may now need to know how multiple jurisdictions operate and take into account the laws and practicalities of more than one country. This is simply one more example of why it is so important to choose the right executor to handle these various complexities.