Deceased Owned Property Outside Ontario: What the Estate Trustee Does

Many estate trustees discover, partway through the work, that the deceased owned a condo, a cottage or land somewhere else. It may be in another province, in the United States or in another country. That does not mean the Ontario work was wasted, but it does add a second set of questions.

This article explains what generally stays within Ontario's reach and what does not. It does not describe the law of other jurisdictions. For that, you will need advice from someone who knows the local rules.

Two questions: who has authority and which law applies

Ontario law gives an estate trustee authority over a person's property under Ontario rules. For example, on death the deceased's real and personal property passes to and vests in the estate trustee, who holds it as trustee for the people entitled to it. How land in another place is dealt with, including who may deal with it and what paperwork is needed, depends on that place's rules, so it is worth confirming with a lawyer there.

The other jurisdiction may have its own requirements before it recognizes your authority. What those are depends on where the land is. A local lawyer can say what the registry or court there will accept.

How the Ontario estate is affected

Estate Administration Tax is not charged on real estate outside Ontario. Ontario real estate counts at its value at the date of death, less mortgages and other encumbrances. So the foreign property generally should not be added to the value you report for Ontario probate, though it may affect planning for the rest of the estate. Check how to list it on the Estate Information Return, which must be filed within 180 calendar days after the certificate is issued.

Ontario guidance says probate (a Certificate of Appointment of Estate Trustee from the Superior Court of Justice) is normally required where the deceased owned real property. Whether that applies to an estate that holds only foreign land depends on the facts, so it is worth confirming with a lawyer. For smaller estates, an estate valued at $150,000 or less may apply to the Superior Court of Justice for a Small Estate Certificate using the Form 74.1A Application.

Joint ownership abroad is another trap. Whether the surviving co-owner takes automatically depends on the local law and how the title is held. Do not assume the Ontario rules on survivorship apply.

Tax on the final return

When a taxpayer dies, they are deemed to have disposed of each capital property, including a cottage or rental property, immediately before death at fair market value, and this can trigger capital gains on the final return. Ask the accountant how foreign property is reported, and whether the other country also taxes the death or the transfer. Those are separate questions and need local advice.

Some relief may be available. Property left to a spouse or common-law partner resident in Canada, or to a qualifying spousal trust, rolls over at cost, provided it vests in the spouse or trust within 36 months after death, although the legal representative may elect out of the rollover under s. 70(6.2). Some or all of the gain on a principal residence may be exempt, but the legal representative must still designate the property on the final return using Schedule 3 and Form T1255. A family can shelter only one home for any given year, such as the city house or the cottage.

Co-owners, sale and distribution

If the estate holds a share with relatives or others, the options may include keeping the property, buying out the other owners, or selling. Rules for forcing a sale of co-owned land are set locally. In Ontario, for instance, joint tenants and tenants in common may be compelled to partition or sell Ontario land, but that does not control land elsewhere.

Currency, fees and local taxes can reduce what the beneficiaries eventually receive. Under the Trustee Act, an estate trustee who has given the required notice to creditors may distribute the estate and is then not liable to a creditor whose claim they had no notice of at the time of distribution, though that creditor may still follow the proceeds into the hands of those who received them. Keep records of every step.

What to do next

• Collect the deed, tax bills, mortgage statements and any foreign registration details.
• Note who holds title and whether anyone else is a co-owner.
• Find a local lawyer where the land is, and ask what documents they need from Ontario.
• Tell the accountant about the property before the final return is prepared.
• Keep the foreign property in your estate inventory and records.
• Speak with an Ontario estates lawyer to coordinate the Ontario and local steps.

Frequently asked questions