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How the location of the executor can affect an estate

Individuals in British Columbia who are working on their estate plan may wonder whether the location of the estate executor has any impact on their estate. After a person's death, the residency of their estate will be the same as the residency of the estate executor. The executor's location, therefore, can have a major impact on how the estate is taxed.

There could be many drawbacks to choosing a nonresident of Canada as the executor of an estate. During estate administration, the estate may be subject to tax laws in the country where the executor lives. In some cases, the estate could be deemed a dual resident and end up owing estate taxes in both Canada and the executor's country of residence.

Another negative impact of choosing a nonresident executor for an estate is that the executor would not be able to take advantage of preferred tax treatment for source dividends and capital gains. Taxes on a nonresident estate would also not be split between the Canadian beneficiaries and the estate itself, which could have some potential benefits.

The residency status of an executor is only one of many issues that a person might have to consider when engaged in estate planning. Understanding the different benefits and drawbacks of certain decisions can be difficult because of the complexity of estate law, and creating the necessary documents for outlining one's wishes may require some professional assistance. A lawyer who is familiar with estate planning strategies may be able to help a client understand the different ways that wills, trusts and executor designations might affect the value and distribution of one's legacy.

Source: Castanet.net, "Can executor be a non-resident?", October 09, 2014

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