Estate Planning for Canadians with US real estate

    Written by Max Reed

    Canadians who own US real estate need to make sure that their wishes after they die are carried out on both sides of the border. This is a different issue than the US federal estate tax exposure faced by Canadians who own US assets.

    Each Canadian province and US state has its own rules that apply to the validity of a will. That means that a will that is valid in one place might not work in another. For instance, a will that meets the legal requirements to be valid in British Columbia might not be valid in North Carolina. The effect of this would be that the intestacy rules of North Carolina might apply and the property might pass to a different person than was intended. Consider the example of Jack and Jill to illustrate this problem. Jack and Jill live in British Columbia, but Jack owns a vacation property in North Carolina. Jack wants to leave the house in North Carolina to his son John from his first marriage so he makes a will in British Columbia doing just that. In BC, for a will to be valid, it requires two witnesses. However, in North Carolina, for a foreign will to be valid over North Carolina real estate, it needs to meet the requirements of North Carolina law. Specifically, it needs to be signed in front of a notary. If it is not signed in front of a notary, then the will is not valid and the intestacy rules (the default rules) will apply. In Jack’s case, this means that unless he consults a lawyer familiar with wills involving assets in multiple jurisdictions and follows the North Carolina requirements, it will not be valid in North Carolina and his wish that the house be left to John will be ineffective. Instead, it might be left to his wife Jill under the default rules of North Carolina. To prevent this from happening, Jack needs to use a lawyer in BC familiar with wills where there are assets in multiple jurisdictions. And he needs to get legal advice in North Carolina on how to make his will work there. Or, he could set up a trust in Canada that would avoid the need to have a North Carolina will altogether. To be clear, this blog post just uses BC and North Carolina as examples. This problem arises whenever a Canadian has real estate in the US or another jurisdiction.

    To solve this problem, there are a number of options:

    • Get legal advice in both the province where you live and the state where you own the real estate to make sure the will works in both places or have two wills;
    • Use a Canadian trust that avoids the need to probate the property in the other jurisdiction.

    Whatever option is chosen, Canadians who have US real estate need to pay attention to make sure their wishes are effective in every jurisdiction that they have real estate.