Paying a Beneficiary Who Lives Abroad: Ontario Executor Guide

If you are the executor and one of the people entitled to the estate lives outside Canada, the job has the same core duties as any other estate, with a few extra practical steps. Distance affects notice periods, paperwork and how money physically gets to the person.

This article covers what the Ontario rules say that bears on a beneficiary abroad. Specific questions, such as whether tax must be withheld from a payment to a non-resident or how a currency conversion is handled, depend on the facts and the type of asset. Those are worth confirming with a lawyer or accountant before you pay.

The core duties do not change

Ontario's official guidance says the estate is distributed once the assets have been liquidated and the funeral and burial expenses and any debts have been paid. That applies whether the beneficiary lives in Toronto or another country. As legal representative, you must file all required returns for the deceased, make sure any balance owing is paid before distributing the estate, and confirm that all balances owing to the CRA are resolved.

If you are tempted to pay a foreign heir early, pause. Debts, funeral expenses and tax come first, and the estate is distributed after those are dealt with.

Tax steps to settle before any payment

Tax is the main reason distribution should wait. The final T1 return is due April 30 of the following year for a death from January 1 to October 31, and six months after death for a death from November 1 to December 31. If the deceased or a spouse or common-law partner living with them was running a business on the date of death, the filing date moves to June 15 of the following year for deaths from January 1 to December 15, though payment is still due on the regular date.

The estate itself may need a T3 trust return, due no later than 90 days after the trust's tax year-end, with any balance owing due in the same 90 days. A trust must file if it has total income from all sources of more than $500, and must also file, even at $500 or less, if it makes a capital distribution to beneficiaries. A distribution to a foreign heir can therefore trigger a filing.

A clearance certificate confirms that the estate has paid all amounts of income tax. If you distribute without one and tax is owing, you are personally liable for the unpaid amounts, up to the value of the assets distributed. You request it on Form TX19 only after the required returns are filed and assessed and taxes are paid or secured. The CRA acknowledges the request within 45 days, and the assessment can take up to 120 days. If the deceased had a GST/HST number, a separate Form GST352 is also needed.

Notices and court accounts

If the estate goes to court to pass its accounts, the notice of application and draft judgment must be served on every person with a contingent or vested interest at least 60 days before the hearing date, and 75 days if served outside Ontario. Plan for that extra time if your heir lives abroad. A beneficiary who objects to the accounts must serve a Notice of Objection to Accounts (Form 74.45) at least 35 days before the hearing.

• Estate accounts must show assets at the date of death, all money received, all liabilities and the compensation claimed.
• If a beneficiary is under 18, the Office of the Children's Lawyer may act for them in estate matters.
• Under Trustee Act s. 53(1), a personal representative who gives the notices the court would have directed is not liable for amounts distributed to a person whose claim they had no notice of, but this protection does not apply to heirs, next of kin, devisees or legatees claiming as such.

Identity, currency and moving the money

How to verify a foreign beneficiary and which currency to use depend on your bank and the type of asset, so it is worth confirming the approach with a lawyer or accountant. Expect a bank to ask for identification and for details of the receiving account. Sending money across borders can involve transfer fees and exchange rates, and the amount received may differ from the amount sent.

• Ask the beneficiary for a clear copy of government identification and their full legal name as it appears in the will.
• Get the receiving bank's details in writing and confirm them by a second channel, such as a phone call, to reduce fraud risk.
• Agree in writing on the currency and who bears transfer costs.
• Ask the beneficiary to sign a receipt for each payment, and keep it with the estate records.
• Confirm with an accountant whether tax has to be withheld from the payment before you send it.

Keeping accurate records of every transaction is part of the executor's role. Foreign payments are no exception.

What to do next

• Confirm that debts and funeral costs are paid and that all required returns are filed and all balances owing to the CRA are resolved before any distribution.
• Make sure the final T1 and any T3 return are filed and assessed.
• Request a clearance certificate once returns are filed and assessed and taxes are paid or secured; if you distribute without one and tax is owing, you are personally liable.
• Collect identification and payment details from the beneficiary.
• Ask a lawyer or accountant about withholding and about any tax rules in the beneficiary's own country.
• Keep receipts and records for every payment.

Frequently asked questions