Wills and power of attorney for cross-border clients

Whether in the sunny South or ski country, many clients have invested in holiday homes outside Canada. Property ownership often means vehicles, furniture and bank accounts are also located in the holiday jurisdiction. These foreign assets become an important part of an estate plan, requiring a review of wills and powers of attorney (PoAs).

Wills

While in most cases one will can dispose of all assets regardless of where they’re located, a common planning technique is entering a will in each jurisdiction where property is owned.

Multiple wills have several advantages:

Choice of executor. A will in each jurisdiction allows a testator to choose separate executors, both of whom have jurisdictional expertise. Additionally, several jurisdictions, such as Ontario, require a foreign executor to post a bond as security before applying for probate. Appointing local executors avoids this expense.

Shorter probate process. With separate wills, probate applications can proceed independently in each jurisdiction, which can save a significant amount of time. Where one will is used, the executor is required to “reseal” or obtain a secondary grant of probate after probate is obtained in the primary jurisdiction.

Meeting formal requirements. The requirements for making a will may differ in each jurisdiction. Many jurisdictions, such as Ontario, have statutory provisions that recognize foreign wills so long as they complied with the laws where they were entered. However, this isn’t universally true. In other words, a foreign will may be required to deal with foreign property.

Meeting requirements for property transfer. The rules for transferring real estate may also differ. For instance, in some civil law jurisdictions, rules of forced heirship may override the will provisions. Where a will is drafted in the jurisdiction where the land is held, there may be clauses available to address these rules.

Planning opportunities. A jurisdiction may have unique planning tools designed to save costs. For instance, many states, such as Hawaii or Arizona, have adopted the provisions of the Uniform Real Property Transfers on Death Act, which allows real property to be transferred outside a will by entering a revocable deed during the owner’s life, thus avoiding probate. Without meeting with a solicitor who understands the laws of each jurisdiction, such planning opportunities may be missed.

Less expense: Having only one will may prove to be more expensive. Drafting a will that has the clauses required for both jurisdictions can be complex. Secondly, a solicitor qualified in the foreign jurisdiction should review the will, which can add to costs.

Addressing tax implications. Significant tax implications may not be addressed when the testator has only a single will. For example, special planning may be required where the testator is a U.S. citizen and wishes to leave U.S. property to a grandchild to avoid the generation-skipping transfer tax — a special tax levied when property bypasses a generation.

Powers of attorney

Foreign ownership can complicate a PoA for personal care or finances. Several of the considerations discussed above apply to PoAs, with the following additions:

Choice of attorney. Unlike with a will, no bonding requirements are associated with a PoA. However, because a PoA acts on a daily basis, naming an attorney located in the jurisdiction where assets are located may be prudent.

Validity. Most provinces recognize a foreign PoA. Therefore, in Canada most American PoAs are recognized. However, the reverse isn’t true; each state has different rules. For instance, Florida’s legislation recognizes foreign PoAs, but only where the original was executed in an American jurisdiction. Therefore, Canadian PoAs will likely not be recognized.

Avoidance of limitations. Even where a PoA is recognized, there may be unique rules to consider. For instance, some states limit what an attorney can do unless specific terms or conditions are set out in the document. Connecticut, for instance, states that an attorney cannot transfer property unless the PoA is witnessed and notarized in accordance with the state’s laws. However, the PoA may be recognized for other purposes.

Conclusion

Snowbirds or other Canadians who travel regularly or own property in foreign jurisdictions must consider their estate plans carefully. Having estate planning documents completed both at home and in their holiday destination is often a good idea. Consulting tax and estate planning specialists in both jurisdictions is also important to avoid problems and expenses.

Keith Masterman, LLB, TEP, is vice-president, Tax, Retirement and Estate Planning at CI Global Asset Management. He can be reached at kmasterm@ci.com.

Keith Masterman

Tax & Estate

Keith Masterman, LLB, TEP, is vice-president, Tax, Retirement and Estate Planning at CI Global Asset Management. He can be reached at kmasterm@ci.com.