Cross Border Inheritance: What You Need to Know

Canada is one of the few countries that can benefit from its close relations with the US. It’s always been relatively easy for Canadians to migrate to the US seeking jobs, investment opportunities or a swift change. However, they don’t often stop to consider the grave implications of poor estate planning. It can be a tedious affair, but it will save you and your future generations a ton of money in taxes.

It would be best to safeguard your assets from financial mishaps and ensure they go to your loved ones. To avoid losing your assets when relocating to a different country, you must have an effective estate plan for cross-border inherence.

Managing Cross Border Inheritance

Most issues arise when one or more beneficiaries of an Ontario estate live in the United States. When a distribution is issued to a beneficiary who is not a resident of Canada for income tax purposes, there may be filing requirements or the need to acquire a clearance certificate under section 116 of the Income Tax Act (Canada). Section 116 governs the sale of “Taxable Canadian Property,” which includes:

  • Real estate in Canada
  • Shares in a private Canadian corporation in which more than half of the value is generated from Canadian real estate or specified Canadian resource property
  • Assets utilized in a Canadian firm.
  • A trust interest whose fair market value was generated directly or indirectly from Canadian real property (or Canadian resource property) 60 months before disposition.

When inheritance is passed to a non-resident beneficiary, it leads to a disposition of an interest in the inheritance (be it an estate or a trust). Accordingly, you or the beneficiary must acquire a clearing certificate before selling Taxable Canadian Property to a non-resident. However, you can make a filing indicating disposition within ten days of the disposition date.

Why You Should Consider a CBT (Cross Border Trust)

Inheritance planning can be stressful, even if it’s within the same country. Having to plan cross-border inheritance has its added risks. However, CBTs lower the risk factors, provide you with peace of mind, and are becoming more and more common these days.

The most significant benefit of passing your inheritance through a trust is that you can skip the probate process altogether. The process where the court determines the validity of your will is called probate. It can often be a time-consuming and painfully expensive process. Anything that doesn’t have a direct beneficiary will go to your heir through a will when you die. Therefore, your will passes through probate before the court can transfer the inheritance to your heir. However, during the probate process, the court can freeze your assets until details of your will can be verified.

Cross Border Inheritance Planning with Mikhailitchenko

When it comes to Estate Planning, we at Mikhailitchenko Law Office have a dedicated team of experienced attorneys. We can guide you through the complicated cross-border inherence process, help minimize risks and ensure a hassle-free experience. Contact our team today to learn more about what we offer and how we can help you.