Probate & Incapacity

Tom, 45, lives in Toronto, ran into a number of unforeseen roadblocks in the process of selling his parents’ condo.

Twenty years ago, Tom’s parents, Susanna and Maurice, purchased their condo in Naples, Florida for $250,000 USD. His parents, both Canadian citizens and residents, wintered there religiously (getting away from the dreary Canadian winters whenever possible). Over time, the condo appreciated in value to approximately $1,000,000 USD. Unfortunately, Susanna passed away last year. Susanna held title to the property solely in her name. With her husband as the main beneficiary of her estate the condo was left to him. According to Florida law, the property is subject to Probate in Collier County, Florida, where the property is situated. Probate is the legal procedure required to transfer legal title to the beneficiaries upon death. As per Florida statutes, Probate may cost up to approximately 3% of the value of the Florida estate, which in this case translates into approximately $30,000 USD. As well as being costly, Probate is time consuming, lasting approximately 8 to18 months and freezes the estate. After completing a long, expensive and demoralizing probate process, Tom came to see us. The situation had become further complicated by the fact that 6 months ago his father was diagnosed with Alzheimer’s disease. With his father unable to travel, and having his own place in Miami Beach, there was no longer a use for the condo and Tom was keen to put it on the market. It was at this point that Tom began to run into more trouble. Legally, the title still remained in his father’s name and only he could sell the condo. With Maurice mentally incapacitated and Tom no longer sure of his options he came to us again. In order for Tom to sell the property he needs to be appointed guardian of his father by the Florida Court. In Florida, a Guardianship proceeding is a legal proceeding under which a person who lacks the ability to manage certain functions of daily living is declared by a Court to be incapacitated. He loses the legal right to make certain decisions including the sale or mortgage of any Florida property. Next, the court will appoint physicians and social workers to make assessments. After the appropriate paper work is filed with the Court an incapacity hearing will take place (it is here that the court will determine if Maurice is incapacitated). Once the Court makes a finding of incapacity a guardian can be appointed. Guardianship proceedings require legal representation, are often quite lengthy and can be costly. After we guided Tom and his family through the Guardianship procedures, we met again to discuss the sale of the condo. Reflecting back on all the difficulties he had been through, Tom asked if there was anything that could have been done to avoid what he had just gone through. Simply, the answer is yes. Creating a Cross Border Trust SM and transferring the title into it would have allowed Tom to completely avoid probate and the long guardianship proceedings. Transferring property into a Cross Border Trust SM, avoids probate upon death as the Cross Border Trust SM does not die, as well, it avoids issues regarding incapacity and guardianship determinations. Rather than going through a guardianship proceeding, The Cross Border Trust SM enables the successor trustee(s) to step in to manage assets without Court intervention. Other benefits in the Cross Border Trust SM include the possible reduction and/or differing of U.S. estate taxes upon death. Additionally, this type of trust will preserve foreign credits in Canada under the Canada/Us Tax Treaty regarding capital gains tax. What does this mean? It means avoiding double capital gains tax (you will pay in the U.S. and get a credit in Canada EX: The IRS rate is 15% and the Quebec rate is 24%, you will be charged 24 % less 15% on your Quebec taxes). The Cross Border Trust SM can also protect the children as beneficiaries against their creditors and/or a beneficiary’s divorcing spouse realizing rights to the property in the Cross Border Trust SM. Fortunately the story does have a happy ending of sorts. With our firm representing Tom, the sale of the condo ran smoothly. We then created a Cross Border Trust SM for his Miami Beach property, protecting his wife and children from going through any of the complicated legal issues such as probate and incapacity.

Issues that Canadians face when buying U.S. Property

Canadian clients contact the cross border experts at Altro & Associates every day, looking for the perfect structure to buy real estate investment/vacation properties in the United States. With all of the distressed property in the U.S., there is no better time for savvy Canadian investors to purchase American real estate. However, Canadians need to be aware of some of the issues that can trip up investors.

The first issue that Canadians need to be aware of is U.S. probate. Probate is the legal procedure used to settle the property of the deceased. Probate will have to be conducted in the U.S. even if your estate is already probated in Canada. Probate is expensive and time consuming. A Florida attorney is allowed by statute to charge 3% of the fair market value of your U.S. assets as a probate fee. Read the rest of this entry »

David A. Altro featured in the Calgary Herald

David Altro is featured in this article about tax planning for Canadians owning property in the U.S. Click here to view the article online or scroll down to read the full article.

Have a U.S. property? The tax man cometh
JUNE 29, 2011

As a manager with the Royal Bank of Canada and the owner of a second home in Phoenix, Calgarian Bill McFarlane has two perspectives on tax issues related to U.S. real estate.

He and his wife, Dianne, got expert advice, but he knows from his banking work that many Canadian sunbelt buyers take the home-purchase plunge with little or no tax planning.

“We were concerned first and foremost around potential estate tax issues,” so they talked to a tax lawyer to minimize exposure before buying. “You can get advice from a U.S. lawyer but a lot of it doesn’t apply to Canadians.” Read the rest of this entry »

Radio Show – May 24, 2011

Montreal, Quebec – May 24, 2011

On the March 24, 2011 episode of “Dollars and Sense” on CJAD 800 AM, host, Matt Altro and legal expert David A. Altro discussed various problems and solutions for Canadians who own or who are looking to purchase U.S. property.

In parts 1 and 2, David gives advice on how to choose what area in the U.S. to buy property in, what type of offer to make and issues that can arise, such as probate and U.S. estate tax.

In Part 3, Matt and David take calls from listeners. Jean asks about dual citizenship and inheritance. Rudy wants to know how U.S. and Canadian residency can effects executors of a will and Bob asks about incorporating his business when he moves from Quebec to Ontario.

In Part 4, Catherine asks about shares purchased over 30 years ago and their effect on her ability to get a loan today.

Then, David turns the tables on Matt and asks him about Cross Border Planning Partners, the specialists in helping Canadians move to the U.S.


Part 1

Part 2

Part 3

Part 4