Foreign Property = Need for Specialized Wills
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The complexity associated with drafting your last will & testament intensifies exponentially when you (the testator) own property (real estate and other assets) located outside of Canada. While a standard will that is drafted for a Canadian resident may technically be valid in other jurisdictions, it often faces significant legal hurdles that can delay the distribution of an estate for years. Foreign properties are subject to the domestic laws of the country where they are situated, meaning Canadian legal principles do not automatically apply across borders. Consequently, a "one-size-fits-all" approach to estate planning can lead to unintended consequences, such as the total invalidation of specific bequests or the seizure of property by foreign authorities.
One of the most critical considerations is the concept of "Situs," which dictates that the law of the location of the land governs its disposal. Many civil law jurisdictions, particularly in Europe and South America, practice forced heirship, a legal doctrine that requires a specific portion of an estate to pass to certain family members regardless of the testator’s wishes. This stands in stark contrast to the testamentary freedom usually enjoyed in Canada. These mandatory inheritance rules must be appropriately accounted for in the drafting of the will, otherwise the foreign court may override the Canadian will entirely and adversely impact the disposition of the foreign property.
The formal validity of the document presents another layer of administrative difficulty. Every country maintains its own specific requirements regarding the number of witnesses, the presence of a notary, and the exact phrasing of signatures. While the Hague Testamentary Dispositions Convention helps some countries recognize wills drafted abroad, many nations are not signatories to this agreement. Without local compliance, the executors may be forced to undergo a grueling probate or "resealing" process in the foreign country. Taking appropriate steps while you are still alive can mitigate many of the issues, often at a fraction of the cost and without the logistical headaches of coordinating extensive legal work to be undertaken after your death in those foreign countries within which you own property.
Taxation is perhaps the most daunting requirement to address when foreign property is involved. Canada taxes residents on their worldwide income at death, but the foreign country likely also claims a right to tax the property located within its borders. Without careful drafting and an understanding of International Tax Treaties, the estate could face double taxation, significantly devaluing the inheritance. A properly drafted will should account for how these foreign taxes will be paid and whether they should be charged against the specific asset or the general residue of the estate. Failure to specify this can lead to intense litigation between beneficiaries in different countries.
Language barriers and jurisdictional terminology also necessitate a highly detailed approach to the will's definitions. Legal terms like executor, trustee, or life interest may have no direct equivalent in a foreign legal system, or worse, they may mean something entirely different. In some jurisdictions, the concept of a trust is not recognized at all, which can render a Canadian-style testamentary trust completely ineffective for foreign land. Instead, it might be necessary to use specific, localized terminology or undertake a Multiple Wills strategy (often involving drafting one will for Canadian assets and a separate, standalone will for foreign assets, drafted according to the laws of that specific country, with appropriate structuring between the two legal documents).
Achieving the appropriate legal strategy when you own foreign property comes from addressing the matter early on with knowledgeable legal counsel that can properly investigate and coordinate to produce a will and other estate planning documents that optimize your outcome. We welcome you to contact our law firm today at 403-400-4092 or via email at Chris@NeufeldLegal.com to schedule a confidential initial consultation.
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