Ian Worland - Planning for Clients with Assets in Multiple Jurisdictions

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Ian Worland - Planning for Clients with Assets in Multiple Jurisdictions

Transcript of Ian Worland - Planning for Clients with Assets in Multiple Jurisdictions

  • 1. PLANNING ISSUES FOR ASSETS IN MULTIPLE JURISDICTIONS Ian WorlandLegacy Tax + Trust Lawyers February 15, 2005 Abbotsford Estate Planning Council

2. Introduction The principal purpose of this presentation is to identify and discuss issues that arise in estate planning or administration that involve assets in multiple jurisdictions, or a testator, deceased or beneficiary in one jurisdiction with assets in another jurisdiction. Planning Issues for Assets in Multiple Jurisdict 2 3. Organization - Non-Tax Considerations Estate Planning Strategies Tax Considerations for Multi-JurisdictionalPlanning Foreign Tax Considerations Generally US Tax ConsiderationsPlanning Issues for Assets in Multiple Jurisdict3 4. Non-Tax Considerations Administration and Succession Conflict of Laws Grants and the Personal Representative Validity of Wills Testamentary Freedom and Conflict of Laws Probate Fees Planning Issues for Assets in Multiple Jurisdict 4 5. Conflict of Laws - Domicile Jurisdiction where the person is physicallyliving and intends to live indefinitely Domicile of origin Domicile of choice Federal v. State or Provincial domicile Planning Issues for Assets in Multiple Jurisdict 5 6. Conflict of Laws Choice of Law andVenue Which jurisdictions law will apply? Nature of Assets Domicile Which jurisdiction will have the authority todetermine the matter (venue)? Nature of Assets Residence / location of parties, witnesses Juridical advantage Planning Issues for Assets in Multiple Jurisdict 6 7. Conflict of Laws Nature andSitus of Assets Land including leaseholds are immoveable andsitus is location B.C. Wills Act, ss. 39 43 (interest in land) All other assets are movables Chattels are situated where found at the timesitus is determined Rules for movables other than chattelsPlanning Issues for Assets in Multiple Jurisdict7 8. Nature and Situs of Assets.continued Wills Act, Interest in land S. 39(1) includes leasehold estate as well as afreehold estate in land, and any other estate orinterest in land whether the estate or interest isreal property or is personal property S. 43 if the value of a thing that is movableconsists mainly or entirely in its use in connectionwith particular parcel of land by owner or occupierof the land succession under will or intestacygoverned by law of situs Planning Issues for Assets in Multiple Jurisdict 8 9. Non-Tax Issues Grants and thePersonal Representative Place of Obtention Ability to use grant in multiplejurisdictions Exceptions Corporate Statutes US state rulesPlanning Issues for Assets in Multiple Jurisdict9 10. Non-Tax Issues Validity of Wills Formal Validity Material Validity Planning Issues for Assets in Multiple Jurisdict 10 11. Validity of Wills - Formal Validity Execution Requirements At Common law, domicile of death Also, Wills Act, s. 40: For movables, domicile ofTestator at time of execution, domicile of origin,jurisdiction of execution For immoveables, situs governs Holograph Wills (except B.C., N.S., P.E.I.) Harmless Errors Planning Issues for Assets in Multiple Jurisdict 11 12. Validity of Wills Material Validity For movables, law of Testators domicile atdeath (Wills Act, s. 39(3)) For immoveables, law of situs (Wills Act, s.39(2)) Perpetuity and Accumulation Period forTrusts Planning Issues for Assets in Multiple Jurisdict 12 13. Validity of Wills Miscellaneous Capacity Interpretation TrustsPlanning Issues for Assets in Multiple Jurisdict13 14. Inter vivos Trusts - Moveables Formal validity and interpretation isgoverned by the proper law of the trust Example - Choice of law clauses andpower to change the jurisdiction of thetrust Administration is governed by theplace of administrationPlanning Issues for Assets in Multiple Jurisdict14 15. Inter vivos Trusts - Immoveables Formal validity is determined by the situs Interpretation will be governed by the properlaw of the trust or that intended by theSettlor Administration for immoveables uncertainsitus vs. place of administration Testamentary Trusts generally governed bysame conflict rules governing WillsPlanning Issues for Assets in Multiple Jurisdict15 16. Trusts International Trusts Act, R.S.B.C. 1996,c. 237 (Hague Convention on the LawApplicable to Trusts and theirRecognition) Conflict of Laws Rules for Trusts Act,R.S.B.C., c. 65Planning Issues for Assets in Multiple Jurisdict16 17. Non-Tax Issues Testamentary Freedom andConflicts of Law Dependants Relief Legislation (e.g. WillsVariation Act, R.S.B.C. 1996, c. 490) Family Law Legislation Saunders v. VautierPlanning Issues for Assets in Multiple Jurisdict17 18. Testamentary Freedom andConflicts of Law Dependants Relief Dependants Relief Legislation Rules of the Testators domicile will governmovables (Re Soroka (1975), 10 O.R. (2d) 638) Rules of situs will govern immoveables (Re Pulver(1983), 13 E.T.R. 1)Planning Issues for Assets in Multiple Jurisdict18 19. Dependants Relief .continued U.S. resident owning vacation home in B.C. In the U.S. generally can disinherit an adultchild B.C. resident owning vacation home inCalifornia Widow and orphans have statutory rights insome statesPlanning Issues for Assets in Multiple Jurisdict19 20. Testamentary Freedom andConflicts of Law - Family Law Legislation Moveable vs. Immoveable generallygoverns Canadian jurisdictions have deferredfamily property regime In B.C., triggering event does notinclude deathPlanning Issues for Assets in Multiple Jurisdict20 21. Family Law Legislation..continued.. Many U.S. jurisdictions have separateproperty or community propertyregimesPlanning Issues for Assets in Multiple Jurisdict21 22. Testamentary Freedom andConflicts of Law - Variation andTermination of Trusts Rule in Saunders v. Vautier ((1894) 49E.R. 282) typically applies in CommonLaw Jurisdictions Consider Alberta, Manitoba Consider Rules in U.S. Planning Issues for Assets in Multiple Jurisdict 22 23. Probate Fees Probate Fee Act, S.B.C. 1999, c. 4, as amended Re Bloom, 2004 BCSC 70 (SCBC) B.C. probate fees now apply to intangible personalproperty outside the Province for deceased of personordinarily resident in B.C. at death Query constitutionality of this rule Planning to Avoid Probate FeesPlanning Issues for Assets in Multiple Jurisdict23 24. Considering Conflicts of Law Rules inEstate Planning Must be considered for real estate inanother jurisdiction Should be considered for movablesoutside of Canada Must be considered when dealing withforeign clients with assets in BCPlanning Issues for Assets in Multiple Jurisdict24 25. Estate Planning Strategies Separate Situs Wills Inter Vivos Trusts Holding Corporations and othervehiclesPlanning Issues for Assets in Multiple Jurisdict25 26. Estate Planning Strategies -Separate Situs Wills Separate Wills that apply to assets indifferent jurisdictions Example - UKWill for UK assets and BC Will forother assets Advantages may include limitedprobate disclosure, reduced probatefees, efficient timing, choice of lawPlanning Issues for Assets in Multiple Jurisdict26 27. Separate Situs Wills continued Disadvantage is cost e.g. Co-counselreview Considerations include: Choice of Personal Representative Revocation clause Payment of Debts clause Choice of Law clause Planning Issues for Assets in Multiple Jurisdict 27 28. Estate Planning Strategies - Inter vivostrusts Potential Advantages: Avoid Probate May avoid succession or estate taxes May avoid certain creditor claims(including under dependants relief, familylaw legislation) Consolidated instrument Choice of law Planning Issues for Assets in Multiple Jurisdict 28 29. Inter vivos Trusts continued Potential Disadvantages: Tax issues are complex, can be punitive CostPlanning Issues for Assets in Multiple Jurisdict29 30. Inter vivos Trusts - TaxConsiderations Disposition on transfer 21 year rule Taxed at top rate Attribution of Income Transfer Tax Issues Planning Issues for Assets in Multiple Jurisdict 30 31. Tax Considerations ...continued Must consider foreign trust rules inIncome Tax Act Must consider tax law of otherjurisdiction Planning Issues for Assets in Multiple Jurisdict 31 32. Tax Considerations continued Alter Ego Trusts available to Canadianresidents Must be Canadian resident E.g. Canadian Alter Ego Trusts andthe U.S. Revocable Trust Potential mismatch of foreign taxcreditsPlanning Issues for Assets in Multiple Jurisdict32 33. Estate Planning Strategies HoldingCompaniesTransfer of Entire interestTransfer of Legal Title OnlyTax IssuesAvoidance of ProbateAdditional Privacy Planning Issues for Assets in Multiple Jurisdict 33 34. Canadian Tax Considerations inMulti- Jurisdictional Planning Income from foreign sources Interests in non-resident trusts Canadian resident trusts and estateswith non-resident beneficiaries Non-resident clients Immigration to Canada Planning Issues for Assets in Multiple Jurisdict 34 35. Canadian TaxConsiderations ...continued... Interests in non-resident trusts Ss. 94, 94.1 of the Income Tax Act Canadian trusts / estates with non-residentbeneficiaries Tax issues in beneficiarys jurisdiction (e.g.Germany, U.S.) Part XXII.2 Distributions of property to beneficiary Clearance certificate issues Planning Issues for Assets in Multiple Jurisdict 35 36. Canadian TaxConsiderations ...continued... Non-resident clients Part I tax Employed in Canada Carried on business in Canada Disposed of taxable Canadian property Actual and deemed dispositions / proceeds Part XIII Tax Withholding rate Planning Issues for Assets in Multiple Jurisdict 36 37. Canadian TaxConsiderations ...continued... Immigration to Canada Deemed disposition and reacquisition ofmost property 21 year deemed disposition rule for trustsrelates back to original creation Planning Issues for Assets in Multiple Jurisdict 37 38. Foreign Tax Considerations Must be considered when: Client owns property in another jurisdiction Client is resident in