When clients have assets in multiple jurisdictions, they may need local lawyers in both places who can work collaboratively.Raul Rodriguez/Getty Images/iStockphoto
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Estate planning can be complicated. Estate planning when people have property in different jurisdictions can be a whole new challenge altogether.
For financial advisors, knowing what to look for – and what might be missing – in client wills that deal with assets in different provinces or countries can ensure client estates will be handled as smoothly as possible.
Clients might have property in different jurisdictions for all kinds of reasons, says Jason Heath, managing director at Objective Financial Partners Inc. in Markham, Ont.
“Sometimes the decision is on purpose, like a snowbird buying a property down south or a family buying a cottage in another province,” he says. “In other instances, it may be more by accident, like when someone inherits a property in another province or territory.”
In Canada, it’s a common issue, says Damian McGrath, senior trust advisor at Raymond James Trust (Canada) in Saskatoon. Many people have assets in different provinces, and overseas and the key is making sure that’s all taken into account as part of an overall estate plan.
At the very least, a client should have a valid will in the province in which they ordinarily reside, he says. That will would need to be probated where the client lives, but it would also need to be resealed – which means validated – in another province if they had any probatable assets there.
For example, if there is a client who lives in Alberta but has a cottage in British Columbia, the will would be probated in Alberta and then resealed in B.C. Probate refers to the legal process of determining the validity of the will. Having to wait for the will to be probated in one province before it can be resealed in another can cause a delay, Mr. McGrath says.
Depending on the situation, it could be beneficial to get a second will in the province where clients have additional properties because that can prevent delays, but there are also some drawbacks.
“Now, there are two formal documents to keep track of. You have to make sure that there’s a co-ordination between the two and there’s not a conflict,” Mr. McGrath says.
“If I lived in Alberta and had 10 properties in B.C., I might consider a secondary will in B.C. more than if I had just one.”
How to deal with foreign assets
When it comes to property outside of Canada, the general advice is to have a separate will prepared in that foreign jurisdiction. So, for clients that live in Canada but have a home in California, they will want to seek advice about having wills in both Canada and that U.S. state, McGrath says.
That doesn’t necessarily mean a will in Canada won’t be valid there, he adds, but different rules and formalities can apply.
If clients do go with two separate wills, they’ll want to make sure there are no conflicts. For example, they wouldn’t want different beneficiaries for the will created in California than a will created in their home province of Canada, McGrath says. It’s important to ensure a second will does not revoke or affect the other.
For wills in other countries, it can also be beneficial to determine the tax implications on death to be able to plan accordingly, Mr. Heath says.
“There may be foreign taxes payable in addition to Canadian taxes, although often, double taxation is eliminated by claiming a foreign tax credit,” he says.
It’s also important to be conscious of wills created through remote communications. For example, in B.C., e-signatures are valid for signing electronic legal wills.
According to Mr. Heath, Canadian powers of attorney and wills may not be the best option to deal with foreign assets.
“Just because a virtually signed estate document or handwritten will may be valid in Canada, it may not necessarily be in another country,” he says. “When clients have assets in multiple jurisdictions, they may need local lawyers in both countries that can work somewhat collaboratively.”
Working with legal and tax professionals
When working with clients, Kathryn Bennett, senior legal and estate planning consultant at Desjardins Financial Security in Toronto, says advisors should always start with “a good fact find” and open-ended questions to collect information about the client, their family and assets. That can help identify if there are assets outside of their home province or territory.
“If you have a copy of a client’s will or power of attorney for property or personal care, or whatever the document is called, it’s worth asking, ‘Are these the only ones you have?’ especially if you see that they own property, for example, in Mexico or Central America, or somewhere else,” Ms. Bennett says.
If clients are willing to spend a bit of money, she advises asking for a summary of the documents from the lawyer or notary who prepared them so advisors don’t have to work their way through legal terms and phrases that they don’t necessarily need to understand clearly.
“A summary from the lawyer or notary can be useful because that tells you what the plan is,” she says. “And, if you’re then familiar with legal drafting and the wording, you can crosscheck the summary against what the document does and says.”
If the will identifies assets in another jurisdiction, advisors should look for who is identified as the estate trustee – if you’re in Ontario – or other titles like the liquidator or executors.
In other countries, that person might not be able to act. “There are jurisdictions that require the person who administers the estate officially to be someone in that country,” Ms. Bennett says.
“[An advisor is] not necessarily the person who solves the issue. [But they’re] working with the legal, accounting and taxation professionals both in Canada and outside of it to prepare those documents and review them [for the client],” she says.
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