Beware of choosing a U.S. resident as your Executor

executor Oct 25, 2018

The global reach of our economy has provided increased opportunities for our family members to work and study outside of Canada. More and more, our family members are moving to other countries to gain experience, launch their professional careers and take advantage of exciting opportunities.

When creating an estate plan, many families look to their adult relatives to act in the role of Executor and trustee of their Wills. Choosing a competent person for this role is critical to the ensure a smooth transition of wealth to your beneficiaries. But what if your Executor resides in a foreign jurisdiction?

It is much more onerous on the Executor to administer an estate from a different country, creating delays, increased travel and expenses to the estate. However, even more important concerns arise when an Executor is resident in the United States.

1st Issue: Posting a Bond

In Alberta, the law requires non-residents to post a bond in order to act as Executor and estate trustee. The purpose of the bond is to provide protection to the creditors and beneficiaries of the estate. The cost and time required for this bond is often troublesome and costly.

 2nd Issue: A Trust Tax

A second issue could be the trust tax.  Having a non-resident of Canada as an Executor may cause the Canada Revenue Agency to question the residency of the estate if most decisions are made from another country. If an estate is deemed to be a foreign trust, this will result in additional complexity and often unintended tax consequences both in Canada and in the other jurisdiction.

3rd Issue: USA Disclosure Requirements

A third problem is the USA disclosure requirements. These disclosure requirements add complexity because if your Executor resides in the United States, the Executor has obligations to file certain information returns with U.S. government authorities and there are substantial penalties for non-filing. This may also be of concern to your Executor if he or she wants privacy from the peering eyes of the U.S. government.

 4th Issue: Investment Management Concerns

The fourth possible issue is investment management concerns. Regulatory authorities in the investment industry are very strict about trading activity in relation to jurisdictional issues. A Canadian investment advisor may not able to accept investment instructions from a U.S. resident. Many of our clients will indicate in the Will their wish for the Executor and estate trustee to continue to obtain trusted advice from their existing investment advisor. This may not be possible if the Executor/trustee resides in the U.S.

If you are considering naming a relative who resides outside of Canada as your Executor, we encourage you to contact our office to discuss things first.  Our team can help is here to help!

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