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Estates & Wills & Trusts

Detailed estate plan valuable when assets in multiple jurisdictions

It is becoming increasingly common for Canadians to own securities and property in multiple jurisdictions, which can bring estate planning complications and the need for significant consultation with professionals to get the right strategy in place, Calgary trusts and estates lawyer Matt Trotta tells AdvocateDaily.com.

As Trotta, a lawyer with Shea Nerland Law, explains, in recent years, personal asset ownership, families, and the laws surrounding them have been considerably more complex — and every jurisdiction has its own set of rules on how wills are probated and how the administration process is governed.

“While many provinces and states have rules that are somewhat similar in practice, there can be some very significant swings in policy and procedure depending on what side of a provincial or national boundary a testator or their property are situated in,” he adds.

Many countries have addressed the issue of assets in multiple jurisdictions by the establishment of basic criteria necessary for a formal international will.

“For instance, Canada is a signatory to the 1972 UNIDROIT Convention Providing a Uniform Law on the Form of an International Will, along with several other nations. This convention is also enacted into law in most Canadian provinces, including Alberta.”

Although many provinces, states and countries will recognize another jurisdiction’s will and typically probate the will, Trotta says they may not necessarily recognize its intended effect as each area has different rules on matters such as beneficiary entitlement, taxation, and matrimonial property rights which may not be complementary with the drafting jurisdiction.

As such, he says, clients with a home in Alberta, a rental property in B.C., a Canadian securities portfolio, U.S. bank accounts, and a vacation property in California, for example, can face potential pitfalls such as tax inefficiency, increase in complications in probate procedures in other jurisdictions, a conflict of laws, a lack of flexibility, or privacy issues.

Estates that are international in nature can also trigger harsh double tax problems, says Trotta, as some states also have gift taxes, estate taxes or inheritance taxes that may be assessed over and above any tax paid in Canada.

These issues will need to be examined in further detail with tax lawyers, accountants and related professionals in each jurisdiction, he says.

Probate fees may be another issue.

“In some provinces, probate fees are calculated based on a percentage of the value of the estate that falls into the hands of the executor in that jurisdiction. In B.C., for example, these fees can rise to about 1.4 per cent of the value of one’s estate. For a multimillion dollar estate, this amount can be in the tens of thousands of dollars, where the assets may otherwise have been more properly administered in another jurisdiction,” says Trotta.

There may also be questions as to whether or not an executor can properly act in each location.

“Some jurisdictions will not allow an executor that is not resident in that jurisdiction or who is not a blood relative. On more complex estates that require the use of a professional executor or trust company, this can be an added hindrance and cost if not contemplated in advance,” says Trotta.

As such, while there is often a “perceived race to the bottom” when it comes to wills, Trotta says clients with any level of sophistication or complexity in their assets or family dynamics “do themselves and their loved ones no favours when they engage in cheap and simple planning. This is especially so when there are assets in more than one jurisdiction.”

It is important for clients with assets in multiple jurisdictions to expect that the drafting process may require significant discussion, alteration and interaction with multiple professionals to get things right, he adds.

“An experienced estates lawyer is able to identify issues that may arise by working with a client to determine their residency, location of assets, classes of assets, and residence of beneficiaries. From there, they will be able to produce a plan to contemplate the known issues as well as most reasonably foreseeable issues.”

Trotta says a single Canadian will can be effective in addressing a person’s entire estate, even where the property is situated in different provinces or U.S. states, if the drafter is aware of these properties and has an understanding of the relevant issues in each respective jurisdiction. At the same time, he says, there are cases where additional wills may be necessary.

“Having a will drafted in a jurisdiction where the property is held can be very advantageous in the right circumstances as it allows for executors to administer different assets simultaneously with the knowledge that the document is drafted to consider specific issues in compliance with the law of that jurisdiction,” says Trotta.

In all cases, says Trotta, multiple wills need to be carefully and consistently drafted with attention to the structure of each document, and the legal requirements in each jurisdiction.

“There are various issues that can arise if both wills are not prepared by a qualified practitioner in each jurisdiction since there is a much higher risk of drafting errors or conflicts between documents. Since both wills need to be amended in contemplation of the other, amendments due to changes in one’s life circumstances can be time-consuming and costly if done incorrectly,” he says.

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