Wills and energy of legal professional for cross-border purchasers
Multiple wills have several advantages:
Choice of the executor. A will in each jurisdiction allows a testator to select separate executors, both of whom have legal expertise. Additionally, some jurisdictions, such as Ontario, require a foreign executor to deposit a bond as security before applying for an estate. Appointing local executors avoids these costs.
Shorter inheritance proceedings. With separate wills, inheritance applications can be processed independently in each jurisdiction, which can save a considerable amount of time. If a will is used, the executor must “prove” or obtain secondary approval of the estate after the estate is obtained in the primary jurisdiction.
Meet formal requirements. The requirements for drawing up a will may differ from one jurisdiction to another. Many jurisdictions, such as Ontario, have laws that recognize foreign wills as long as they comply with the laws in which they are registered. However, this is not generally applicable. In other words, a foreign will may be required to deal with foreign property.
Meeting the requirements for transfer of ownership. The rules for transferring real estate may also differ. For example, in some civil jurisdictions, the forced inheritance rules can override the will rules. If a will is made in the jurisdiction where the land is held, clauses may be available to govern these rules.
Planning options. A jurisdiction may have unique planning tools that can save costs. For example, many states, such as Hawaii or Arizona, have passed the provisions of the Uniform Real Property Transfers on Death Act, which allows real estate to be transferred outside of a will by entering a revocable deed during the life of the owner to avoid inheritance . Without meeting with an attorney who understands the laws of each jurisdiction, such planning opportunities can be missed.
Less effort: Having only one will can prove more expensive. Drawing up a will with the clauses required by both jurisdictions can be complex. Second, a lawyer qualified in the foreign jurisdiction should review the will, which can add to the cost.
Address tax implications. Material tax implications may not be addressable if the testator has only a single will. For example, special planning may be required if the testator is a US citizen and wishes to leave US property to a grandchild to avoid the generation skip transfer tax – a special tax levied when property bypasses a generation.
Powers of attorney
Foreign ownership can make a personal care or financial PoA difficult. Some of the considerations discussed above apply to PoAs with the following additions:
Choice of lawyer. Unlike a will, there are no binding requirements associated with a PoA. However, since a PoA acts on a daily basis, it may be wise to appoint an attorney who is in the jurisdiction where the assets are located.
Validity. Most provinces recognize a foreign PoA. Therefore, most of the American PoAs are recognized in Canada. However, the opposite is not the case. Every state has different rules. For example, Florida’s legislation recognizes foreign PoAs, but only where the original was executed in an American jurisdiction. As a result, Canadian PoAs are unlikely to be recognized.
Avoidance of restrictions. Even if a PoA is detected, clear rules may need to be followed. For example, some states limit the ability of an attorney to practice unless specific conditions are set out in the document. For example, Connecticut states that an attorney cannot transfer property unless the PoA is witnessed and notarized under state law. However, the PoA can be recognized for other purposes.
Snowbirds or other Canadians who travel regularly or own property in foreign jurisdictions must carefully consider their estate plans. Having estate planning documents filled out both at home and at the vacation spot is often a good idea. Consulting tax and estate planning specialists in both countries is also important to avoid problems and costs.
Keith Masterman, LLB, TEP, is the vice president of tax, age and estate planning for CI Global Asset Management. He can be reached at [email protected].