Canada: Cross-Border Estate Administration: The U.S.- Ontario Mix

Last Updated: September 25 2018
Article by Susannah B. Roth and Margaret O'Sullivan

(September 24, 2018, 9:30 AM EDT) -- As noted in our previous articles, issues arising in cross-border Canada-U.S. estate administration are most helpfully discussed in two parts: Ontario estates (the deceased died or had the bulk of their assets in Ontario) which have some U.S. connection, and U.S. estates (the deceased died or had the bulk of their assets in a U.S. state) which have some Ontario connection. Our first three articles discussed complications arising for Ontario estates with a U.S. connection. This fourth article will discuss complications arising for U.S. estates with an Ontario connection.

A U.S. person for the purposes of this series of articles is a U.S. citizen, including a dual citizen of the U.S. and another country, or a person who is domiciled in the U.S. Domicile is considered the place where a person has a settled intention to make his or her permanent home.

U.S. estate with an Ontario resident beneficiary

Due primarily to the differences between the two tax regimes, in particular taxation on death, there are fewer complications arising for U.S. estates with Ontario connections if there is an outright distribution with no continuing trusts. Typically, an Ontario-resident beneficiary would create no significant complications for a U.S. estate, since the U.S. levies no additional tax on inheritances which are capital distributions payable to non-U.S. persons and Canada treats such inheritances as gifts, which are not taxable in Canada in the hands of a beneficiary when received.

It should be noted that distributions from a U.S. revocable trust are different and special issues can arise given the different rules for taxation of trusts, which are beyond the scope of this article.

U.S. estate of a deceased Canadian citizen

We use the term "estate trustee," the term used for the legal representative of an estate under the Ontario Rules of Civil Procedure. The term executor (where the deceased died with a will) or administrator (where the deceased died without a will) are the traditional terms used for this role.

An estate trustee dealing with the estate of a U.S. resident or citizen who was also a Canadian citizen, would encounter no additional complications due to the deceased's Canadian citizenship, other than it possibly being necessary to inform various federal Canadian and Ontario government authorities, such as Service Canada, Service Ontario and the Canada Revenue Agency, of the individual's death. Canada does not tax based on citizenship or levy an estate tax on its citizens' estates.

Instead, Canada taxes based on actual or deemed tax residence in Canada or on income which is earned in Canada, as well as capital gains tax on certain property located in Canada (referred to as "Taxable Canadian Property") when assets are disposed of or deemed to be disposed of (including on death, subject to exemptions and credits, etc.).

The estate of a non-resident Canadian citizen is typically not required to file Canadian income tax returns unless the deceased owned taxable Canadian property at death or earned income in Canada in the year of death. Canadian income tax complications arising for U.S. estates are discussed more fully in our fifth article in this series.

Probate requirements for U.S. estates owning Ontario property

In many, if not most, cases, an Ontario asset-holder (such as a financial institution) will require that an Ontario probate certificate be obtained by the U.S.-resident estate trustee in order for him or her to be able to deal with Ontario assets. This will be so regardless of whether he or she has already obtained a probate certificate in the U.S. state where the deceased lived or had the majority of their assets. Also, if the deceased owned land in Ontario, in most cases a probate certificate will be required under the Ontario Land Titles rules in order for the executor to be able to deal with the property, although certain exemptions do exist.

The Ontario rules provide that a non-resident of Ontario who applies for an Ontario probate certificate and who is not resident in another Canadian province of territory or a Commonwealth jurisdiction, which would include a U.S.-resident estate trustee, must post a bond in the amount of twice the value of the Ontario assets before the certificate will be issued by the Ontario court (although if the probate certificate sought is a resealed or ancillary grant, the bond must only be for the value of the Ontario assets which will be under the estate trustee's administration). The bond must be provided by an insurance company licensed in Ontario or by one or more personal sureties of the estate trustee, or both.

This requirement can be waived, or the necessary value of the bond reduced by the court in certain circumstances. It may be difficult or even impossible to obtain a bond if the estate trustee has no substantial assets required for the issuance of the bond and no one who will act as a personal surety.

If the deceased died without a will (intestate), a U.S.-resident estate trustee cannot obtain an Ontario certificate to administer the estate assets in Ontario (either original letters of administration or an ancillary grant) as the Ontario rules restrict who may apply for such a certificate to Ontario residents for original certificates and residents of Canada or Commonwealth jurisdictions for secondary certificates (resealed certificates). A U.S.-resident estate trustee needs to find an Ontario- resident individual or a trust company in Ontario to administer the Ontario estate assets.

U.S. financial institutions and trust companies, if they are not licensed to carry on the business of a trust company in Ontario, may not be able to act as an estate trustee to administer Ontario assets, even though appointed under the deceased's will. However, in at least one Ontario case, the court allowed a U.S. trust company to apply for and receive an Ontario probate certificate where it was necessary to administer Ontario real property owned by the deceased on the basis that the trust company was not attempting to carry on business or hold itself out as an Ontario trust company, but the appointed trustee needed to administer a non-resident's estate where the deceased happened to own land in Ontario.

If no probate certificate has been obtained in a U.S. jurisdiction, an Ontario probate application will be considered the original application. The estate trustee must pay Ontario probate fees (estate administration tax) on the value of all the deceased's worldwide property, other than certain exempt assets such as property held jointly with another person and passing to that person by right of survivorship, assets with beneficiary designations and real property located outside Ontario. At the current rate of approximately 1.5 per cent, this can create a serious and unexpected financial cost for the estate, which may otherwise not require an Ontario probate certificate to be administered, but the total value of which will nonetheless be subject to Ontario probate fees.

Where a probate certificate for a deceased who died with a will is first obtained from a U.S. jurisdiction, the Ontario probate process will be an ancillary process, and Ontario probate fees will only be payable on the value of the deceased's assets located in Ontario. This may still create some double taxation if the U.S. original probate state also levies probate fees on the value of the deceased's property, including some or all of the Ontario assets.

Other complications, causing additional time and expense, may arise if the U.S. jurisdiction's original probate documentation does not co-ordinate well with the Ontario rules. Sometimes even different terminology between the U.S. jurisdiction and Ontario can create confusion.

Further, the U.S. probate process may be complicated by the fact of the necessity to complete the Ontario probate process. For example, in some U.S. states, the necessary U.S. court documentation required by the Ontario probate rules will not be issued after the U.S. probate has been closed. This will mean that the U.S. probate will have to remain open, possibly requiring additional court filings, until it is certain no further documentation is required for the Ontario estate administration.

This is the fourth in a five-part series. Read part one here, part two here, and part three here. Part five will continue to discuss complications arising for U.S. estates with an Ontario connection.

This article was originally published by The Lawyer's Daily (www.thelawyersdaily.ca), part of LexisNexis Canada Inc.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Susannah B. Roth
Similar Articles
Relevancy Powered by MondaqAI
O'Sullivan Estate Lawyers LLP
O'Sullivan Estate Lawyers LLP
O'Sullivan Estate Lawyers LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
O'Sullivan Estate Lawyers LLP
O'Sullivan Estate Lawyers LLP
O'Sullivan Estate Lawyers LLP
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions