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Updated on February 19, 2024
As winter approaches, many dream of buying a property by the sea in Florida or a golf course in Arizona. But what happens at the time of death?
Owning real estate in the United States requires proper estate planning to avoid unpleasant surprises, hassles and excessive costs for the estate.
The first common error is assuming that the will is the final authority and that the property will automatically pass to the beneficiaries. This is not always the case.
A will drawn up and notarized in Canada is valid in the United States. It is not necessary to make one specifically for the U.S. However, U.S. laws stipulate that on the death of the Canadian owner of a residence in the United States, the will notarized in Canada must be probated by the U.S. authorities. This process must be completed before the property can be transferred to the estate.
Probating the will: high costs and delays
Even though it is a simple formality, this process involves significant costs, based on a certain percentage of the value of the estate or an hourly rate. In addition, the time needed to obtain probate can be quite long, ranging from six to twelve months.
If the will is not in English, it will also have to be translated, which will cause further delays and additional costs. It would be helpful to file an English version of your will here in Canada.
How can I avoid probate?
There are, however, legal instruments or ways of holding a residence in the U.S. that make it possible to avoid probate of a will in that country. This makes it easier to transfer property to the estate.
Joint Tenancy With a Right of Survivorship
In estate law, Joint Tenancy With a Right of Survivorship allows a couple, for example, to share a property with the same equal right to retain or dispose of the property. Simply put, the surviving spouse automatically inherits the property without having to go through the probate process.
Lady Bird Deed and Life Estate
A Lady Bird Deed and Life Estate are tools that facilitate the transfer of the deceased’s property to the heirs while ensuring that the use, control and ownership of the property are maintained during the deceased’s lifetime.
Revocable trust
Lastly, setting up a revocable trust to transfer ownership also allows beneficiaries to avoid the inconvenience of probate proceedings. However, it is important to be careful when using such a vehicle. In some cases, the trust may be subject to the 21-year deemed disposition rule. If so, it could be deemed to have sold and reacquired the property after that time. The accrued gains would then be taxed, even if the property is not sold. While a revocable trust may be useful in some cases, it’s not always appropriate.
Better safe than sorry
In all cases, it is important to ensure that the will provisions do not conflict with the legal status chosen to ensure the transfer of property.
Anyone wishing to purchase property in the United States would be well advised to plan such an acquisition carefully in order to facilitate the transfer of title to the heirs, and at a lower cost.