If someone has a second will pertaining to foreign assets, and the domestic executors either do not know about this second will, or cannot deal with the foreign executors on a timely basis, would the status of the estate as a graduated rate estate (GRE) be invalidated if only the domestic executors elected for the estate to be a GRE?
The Canada Revenue Agency (CRA) was asked this question and their response was not entirely surprising.
The CRA noted that where an individual has multiple wills, there is nothing to preclude these from being separately administered. However, the CRA is of the view that an individual’s estate encompasses all of the worldwide property owned by the individual at death. The Income Tax Act definition of a GRE is an estate that arose on and as a consequence of the death of an individual and can only be the graduated rate estate if all of the requirements in paragraphs (a) through (e) of the definition are met. The CRA pointed out that in a multiple will situation, the requirements in paragraphs (d) and (e) could be of particular concern. Paragraph (d) requires that the estate designate itself as the graduated rate estate of the individual and it will be necessary to ensure that the domestic executors be given the ability to make the GRE designation. Paragraph (e) requires that no other GRE designation has been made in respect of the individual and the domestic executors would be well advised to assure themselves that a designation has not been made by the foreign executors in respect of the individual.
Be careful when drafting wills to ensure the GRE benefits and lower overall taxes.