Working on an estate plan can get pretty complex depending on the type and location of assets held by an individual at the time of his or her death. Estate planning can get very complicated when some of those assets are located outside Canada especially in a country that is governed by a completely different legal system.
Many Canadians hold assets abroad. Some Canadians have jobs that have taken them to more than one country and they have purchased real estate in those countries. “Snowbirds” may have bought a home or land in Florida or the Carolinas. Different countries have different tax structures and if they clash, problems can arise.
There are differences between income and estate taxes.
Canada does not have estate taxes. In Canada, when someone dies, it is assumed that most of what he or she owned was sold at the market value as of the date of death (deemed disposition rule) and income tax is levied on the capital gains so calculated. Funds in RRSP or RRIF are added to the deceased’s income and income tax is levied accordingly, but there are no estate taxes in Canada.
Problems can arise when another jurisdiction in which the deceased’s asses are located levies estate taxes on a person’s estate. Depending upon the country, they can be called inheritance taxes, death taxes, estate taxes or succession duties.
The deceased may then owe income taxes in Canada upon his or her death and estate taxes to the country in which his or her assets are located.
Tax treaties between Canada and other countries may provide some relief for being taxed twice or even three times in some instances. Double taxation may also happen if the beneficiaries of the estate live in other countries or inherit assets from another jurisdictions.
To navigate the legalities of holding assets in other countries, when it comes to estate planning, it would be wise to consult with an Ontario lawyer seasoned in wills and estates law. An estate lawyer would be able to point his or her clients in the right direction to minimize impact of taxation on their estates and beneficiaries.
Source: theglobeandmail.com, “Holding assets outside Canada? Estate planning can get tricky“, Tim Cestnick, Accessed on Sept. 4, 2017