The Okanagan phenomenon

As soon as the warm spring weather arrives, so do the scores of Albertans, seeking sun, golf, boating, great food and wine. It’s a well-understood phenomenon in the Okanagan that many Albertans choose to invest in a vacation property in BC. However, the implications of estate planning for Albertans who own property in BC are often overlooked.

Most of my clients from Alberta are very surprised to learn how different these two provinces are for estate planning purposes. It’s important for Albertans to understand these differences regardless of age or life stage. Through proactive planning now, Albertans can ensure their estate plan is solid and they can minimize unnecessary cost and delay to their estate by owning real property in BC.

Key differences between BC & Alberta

Probate taxes & wills

The key differences between BC and Alberta estate law relate to probate taxes and wills variation claims.

Most Albertans are shocked to learn that in BC, the Probate Court taxes the gross assets of an estate (with some exceptions) at a rate of roughly 1.4%. Contrast this to the maximum probate fee payable in Alberta of $525.  For example, if we consider a $2 million dollar estate, the BC probate tax fee amounts to approximately $27,500 (compared to $575 in Alberta).

Albertans should also understand which Province’s law applies to an estate, if they are domiciled in Alberta at the time of their death, but own real property in BC.

Immovable vs Movable assets

Our laws distinguish between two types of assets of an estate – real property (land or building, and also called “immovable” assets) and everything else (or “movable” assets). Any real property of an estate is governed by the law of the Province where the real property is located. If an Albertan owns a recreational property in BC, at death, the BC real property will be subject to BC law and BC probate tax.

All movable property is governed by the law of the Province where the deceased person is domiciled (or permanently resides in) at the time of death. In this scenario, Alberta law will govern all movable property of the estate (as well as any real property owned in Alberta).

Many Albertans also have longer-term plans to eventually retire permanently to BC. Applying this understanding set out above, if the former Albertan, now domiciled in BC dies, leaving movable assets in Alberta, including shares of an Alberta private corporation, the value of those Alberta shares will be subject to probate tax in BC. This is a common scenario that without property planning can result in significant negative tax consequences.

Wills variation claims

Albertans are also surprised to learn that BC has more permissive law regarding wills variation claims – where a spouse or child, unhappy with his or her portion of an estate (as defined in a will), brings a legal action against the estate to vary the will, in hopes of gaining a larger portion of the estate. BC, like Alberta, requires a will-maker to provide for his or her spouse and minor children in his or her will to meet his or her “legal obligations” to the spouse and minor children. However, BC goes one step further than Alberta and also places a “moral obligation” on a will-maker which can apply to spouses and children, including adult children.

The Supreme Court of Canada has upheld that:

“while the moral claim of independent adult children may be more tenuous, a large body of case law exists suggesting that, if the size of the estate permits and in the absence of circumstances which negate the existence of such an obligation, some provision for such children should be made.”

The BC court may take many factors into account to determine the existence and extent of a parent’s moral obligation to an independent adult child including (but not limited to) estrangement, extent and quality of the parent child relationship, the presence of abuse, whether all children are treated the same (or whether differential treatment is due to gender, sexual orientation, choice of lifestyle or partner), and the needs of each child, to name a few.  Understanding one’s moral obligations and engaging in proper planning now, can avoid or minimize the consequences of a wills variation action when you are gone, and may also avoid the emotional and financial costs of litigation that can tear a family apart. This is a particularly important planning consideration for modern and blended families. Read our blog post on tailored estate planning for families for more information.

Be prepared & minimize uncertainty

But don’t fret our Albertan friends and visitors. With the advice of your BC estate lawyer and tax accountant and proper planning, most of the negative implications of these scenarios can be avoided or minimized. Using planning tools including (but not limited to) trust planning, multiple wills planning, joint ownership, beneficiary designations, and insurance products can minimize any unnecessary costs, delay and uncertainty to an estate.

As there are costs and benefits of each estate planning tool, each client’s assets, planning goals and unique family situation must be considered to evaluate options and customize an individualized estate plan to meet their unique circumstances.

The information provided above is for educational purposes only. This information is not intended to replace the advice of a lawyer or address specific situations. Your personal situation should be discussed with a lawyer. If you have any questions or concerns, contact a legal professional.

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