By: Kevin-Barry Henry, #1 Bestselling Author
Many Canadians have family members that live abroad. Some moved to pursue education, a career or perhaps love? Some are family members that live in your birth country because you have chosen Canada as your new home. Whatever the reason, it is very common for Canadians to have family members that live in another country.
But what happens when you want to make someone in another country one of the beneficiaries of your estate? It can be complex, but there are efficient ways to make sure they get all that you want them to have, without needing legal and tax teams in both countries. Your executor may also want to hug you!
Consider a person whose child has chosen to live in the US. When this person passes, the executor of their estate will have to be very careful with the distribution of assets to the beneficiaries.
The main drawbacks for non-resident estate transfers in Canada look like this.
- Withholding tax of 25% of value of assets being given to a non-resident beneficiary
- Personal liability for the Executor
- Possible unequal distribution of assets between resident and non-resident beneficiaries
- Jumping through hoops with CRA
The jumping though hoops at CRA part is where your executor will spend a lot of time.
Fortunately, if you have been a regular reader of these pages, you will know what a strong believer in Guaranteed Investment Funds I am, and you will already be at least familiar with their existence.
When Guaranteed Investment Funds are used with named beneficiaries (which of course you will have designated), here’s what happens:
- At the time of death, any taxes owing from the deemed disposition of the assets will be managed and paid from the estate of the owner (you)
- The benefit itself will be delivered directly to the non-resident beneficiary without any withholding tax
- The non-resident beneficiary can work with their local financial planner to determine if any local taxes are owing
- And, in particular, for non-registered money, the proceeds at death will pass directly to the beneficiary without having to go through the time-consuming estate settlement process (No Probate!) – only insurance-based investments can do this!
It turns out that they are not only great for guaranteeing your investment along with being tremendously powerful estate planning tools, but they are also excellent for assets transfers into jurisdictions outside Canada.
If you would like to discuss inter-jurisdictional wealth transfer, feel free to reach out to me for a free 15 minute call here: FREE 15 MINUTES
As always I look forward to hearing from you.
With Gratitude,
KB.
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