Principal Issues: Whether in a multiple will scenario, the status of the estate as a GRE could be invalidated?
Position: There may be concerns in meeting the GRE requirements.
Reasons: There can be only one GRE for a deceased individual irrespective of the number of wills and pursuant to paragraph (e) of the definition of GRE only one designation may be made.
STEP CRA Roundtable – June 10, 2016
QUESTION 2. Graduated Rate Estates and Multiple Wills
If someone has a second will pertaining to foreign assets, and the domestic executors either do not know about this second will, or cannot deal with the foreign executors on a timely basis, would the status of the estate as a graduated rate estate (“GRE”) be invalidated if only the domestic executors elected for the estate to be a GRE?
CRA Response
In our response to Question 2 of the 2015 STEP CRA Roundtable pertaining to graduated rate estates and multiple wills, we noted that where an individual has multiple wills for the purpose of reducing probate taxes, or for other estate planning purposes, there is nothing to preclude these from being separately administered. We also noted that it is our view that an individual’s estate encompasses all of the worldwide property owned by the individual at death.
Pursuant to the definition of a “graduated rate estate” in subsection 248(1) of the Income Tax Act, an estate that arose on and as a consequence of the death of an individual can only be the graduated rate estate in respect of that individual if all of the requirements in paragraphs (a) through (e) of the definition are met. While not an exhaustive list of possible concerns, we would suggest that in a multiple will situation, the requirements in paragraphs (d) and (e) could be of particular concern, from a practical perspective.
Paragraph (d) requires that the estate designate itself as the graduated rate estate of the individual. Obviously, it will be necessary to ensure that the domestic executors been given the ability to make the GRE designation. Furthermore, paragraph (e) requires that no other GRE designation has been made in respect of the individual. Accordingly, the domestic executors would be well advised to assure themselves that a designation has not been made by the foreign executors in respect of the individual.
Given our view that an individual’s estate encompasses all worldwide property, we would also question how, in the absence of unfettered and complete communication amongst the executors, can complete tax reporting in regards to the estate be assured?
2016-063488
Vyjayanthi Srikanth