Foreign Investors and Property Owners - What happens on death?
Sep 23, 2016
The prevalence of foreign investors in the heated housing markets of Toronto has become headline news, and a popular topic of conversation. What is less well known is what happens to such property on the death of the foreign property owner. Who has the ability to deal with the Ontario property?
A common misconception is that the executor appointed in the deceased property owner’s place of residence can automatically deal with his or her Ontario property - this is not the case. In order to administer assets in Ontario, a foreign-appointed executor must seek separate recognition from the Ontario Superior Court of Justice. There are three methods to obtain such recognition – and the applicable method depends on where the foreign grant was obtained.
Where the foreign grant was obtained in a Commonwealth jurisdiction
A Confirmation by Resealing should be sought where the original grant of probate was obtained in a Commonwealth jurisdiction. This is the case irrespective of whether the deceased died with or without a Will. Form 74.27 should be filed with the court along with certified copies of the original grant. The executor must confirm that the foreign grant is still effective and pay estate administration tax based on the value of the property located in Ontario.
Estate Administration Tax is calculated on the overall value of the property and a mortgage or a similar encumbrance against real estate can be deducted when determining the value of property for estate administration tax purposes. The tax is $5 for each $1,000 of the first $50,000 of the property and $15 for each $1,000 of the value exceeding $50,000 – or roughly 1.5% of the overall value of the property.
Where the foreign grant was obtained in a non-Commonwealth jurisdiction (with a Will)
The executor should apply for a Certificate of Ancillary Appointment where the original appointment occurred in a non-Commonwealth jurisdiction, and the deceased died with a Will. A non-Commonwealth jurisdiction includes the United States.
As with a Confirmation by Resealing, the Ontario Court will be recognizing the existence of the original grant of authority. Form 74.27 should be filed with the applicable estate administration tax, and the executor must confirm that the foreign grant is still effective and provide certified copies of such grant. An administration bond is also required where the executor is resident in a non-Commonwealth jurisdiction.
In reviewing the application, the Court is not looking to make any determination as to the validity of the foreign Will, and it will not hear arguments challenging the original Will. Nevertheless, the Ontario Court may refuse the application, and would do so where the applicant is a minor, mentally incompetent or an entity not authorized to act in Ontario.
Where the foreign grant was obtained in a non-Commonwealth jurisdiction (without a Will)
Where the property owner died without a Will in a non-Commonwealth jurisdiction, his or her assets in Ontario may only be administered if an Ontario resident is nominated to act for the foreign-appointed executor. The executor should apply for a Certificate of Appointment of Foreign Executor’s Nominee. Form 74.20.2 must be submitted with the applicable estate administration tax, a copy of the document appointing the foreign executor, and a certificate under seal of the foreign court confirming that the foreign grant of probate is still effective. An administration bond is also required to be posted.
The original probate certificate must have been issued within a reasonable amount of time to making the Ontario application, which can be a difficult hurdle depending on the original jurisdiction. There is also a requirement that the applicant be appointed as the executor in the jurisdiction where the deceased was resident. This can be problematic if the foreign jurisdiction does not require the appointment of an executor.
When an executor obtains the requisite authority from the Ontario Superior Court of Justice, he or she can deal with the foreign property owner’s assets located in Ontario, including interests in real property. An Ontario lawyer knowledgeable about such applications should be consulted.