Non-resident trustees

There is no requirement that an estate trustee must be resident in Ontario.  However, non-residence of the trustee creates some important issues with respect to

  1. probate, specifically bonding (learn more here);
  2. income taxes;
  3. investment management.

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Non-resident estate trustees

Intestacy (No Will)

When there is no Will, with very rare exceptions, the estate trustee must be resident in Ontario.

The exception can only be granted to residents of provinces other than Ontario, and thus there is no possibility of appointment of someone who lives outside Canada.

The exception is not readily granted.  It may be accessed, on specialized court order, when the estate is very simple (a modest amount of after-tax funds in one bank account, for instance).  Usually there must be only one beneficiary who must also be the applicant, although it is conceivable that the order will be granted if the applicant is one of several beneficiaries and all beneficiaries consent.

With a will – trustee resident in the Commonwealth – probate

If an individual named as an executor in the Will and resident anywhere in the Commonwealth (any province in Canada, the United Kingdom, or other Commonwealth country), then no bond is required and there is no impediment to probate of the Will.

If the proposed estate trustee is not named as an executor in the Will, then the applicant must either post a bond or secure a Court order dispensing with the bond.  Bonding is difficult, time consuming and expensive.  A Court order to dispense with the bond under these circumstances is possible, but will be quite challenging to secure and will require considerable evidence about the estate and the proposed trustee.  Unanimous support from the beneficiaries, and from the co-trustee(s), if any, will assist to secure this order.

 

With a will – trustee resident outside the Commonwealth – probate

If an individual who is named as an executor in the Will, but is not resident in the Commonwealth, applies for probate they must either post a bond for 2x the value of the estate (difficult, time consuming and expensive to secure) or secure a court order dispensing with the bond.

This is where good drafting of the Will comes in to play: if the Will expressly references that the proposed trustee resides outside Canada, and, expressly provides that no bond is required, then it is much more likely that the Court Order dispensing with the bond will be granted.

In the absence of these provisions in the Will, securing an Order to dispense with the bond will not be easy and will require significant evidence and consents.

Non-resident trustee – tax issues

If the majority of trustees of a trust, including trusts established by a will, are not residents in Canada, then the Canada Revenue Agency may deem the trust non-resident for Canadian income tax purposes.  This can have significant adverse Canadian income tax consequences, including that the trustees may be required to withhold and remit to CRA income taxes on any distribution of the trust to beneficiaries.

Equally, if the majority of trustees are resident in another jurisdiction (for instance, the United States) the trust may be subject to taxes in that jurisdiction.

Note: separate issues arise for payments to non-resident beneficairies.

Non-resident trustee – investment management issues

Most Ontario investment advisors are only licensed to provide advice to Ontarians.  Accordingly, it is quite possible that an investment advisor may refuse to deal with trustees of a trust (including an estate) who are not resident in Ontario.

 

This is not an estate law issue – it is a professional regulation and insurance issue, and must be addressed directly with the investment advisor.

 

Powers of attorney

For non-resident powers of attorney, the issues are primarily practical rather than legal.  There is no legal prohibition against granting a power of attorney for property or personal care to someone who is not ordinarily resident in Ontario.  However, the practical concerns are real: will the attorney be able to assist with finances?  Will they be present when personal care issues must be addressed?

As a general rule, powers of attorney are most useful when granted to attorneys who can be physically present when the grantor needs someone to act.

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