It is important that you consider whether you have tax ties to other jurisdictions because of your residency, citizenship or domicile. Movement across jurisdictions and borders is now very common in our world, whether for vacation, retirement or international work assignments.
Residence is the act or fact of dwelling in a place for a period of time. Many regularly stay at or in some place for the discharge of a duty or the enjoyment of a benefit. For every person, residency is a factor that determines their legal status with respect to at least one country. Each country determines a given person’s residency according to their laws and regulations, including for the purpose of collecting taxes. As residency is not necessarily determined by physical presence in a country, it is possible to be a resident of more than one country and have taxes payable to all such countries. Canada, like many countries, imposes tax on its residents’ world-wide incomes which taxes may be payable in the course of administering an estate.
Citizenship is essentially membership in a certain state, is a personal status only granted to certain individuals and is not lost by changing physical locations. As with residency, it is possible for people to be a citizen of more than one country, often called “dual citizenship”. Similarly, individuals are subject to the tax laws of the countries of which they are citizens and should consider the implications when planning their estate.
A domicile is a person’s fixed, permanent and principal national home for legal purposes. Generally speaking, it is also the place to which if that person is absent from that home, they intend to return after the purpose for them being absent is accomplished. Thus the intentions of the person is an important, but informal, psychological factor in determining domicile. Thus, domicile can be changed by a person’s actions without getting the permission of any government or authority. This is different from citizenship where one must take positive steps to change it, either renouncing citizenship of one country and/or applying for citizenship in another country.
As alluded to above, these statuses have different implications in the context of estate planning and administration. For example, many Canadian residents spend time in the United States each year, which may create taxation problems in the United States. Also, there are Canadian residents who may still be American citizens or only gave up their American citizenship status in recent years, thus American estate tax rules apply to them. Furthermore, where domicile of birth has been retained, jurisdictional issues arise for will making purposes.
Thus, the tax implications of citizenship and residency should be scrutinized in the estate planning and administration context and professional advice should be sought when necessary. Holding assets in other jurisdictions presents similar tax and other estate administration issues that must be balanced and resolved for your estate.
Andrea Kelly, Lawyer, has extensive experience in wills, trusts, powers of attorney and estate administration matters. She provides clients with a high standard of timely professionalism and expertise, incorporating a very thorough fact finding process. This is quite often enlightening for her clients and facilitates individually tailored services. If you would like to know more, feel free to use the easy contact form or read Andrea’s bio.