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Have there been any notable recent developments in the provision of private client and offshore services in your jurisdiction, including any regulatory changes or case law?
The most notable development in the provision of private client services in Canada is the sheer volume and nature of proposed relevant income tax changes, leading one tax service (Wolters Kluwer Canada Limited) to produce a 616-page Special Report: Tax Year in Review, 2017. Specifically, the federal Department of Finance proposed, among other things, substantial changes to how owners of private corporations would be taxed, as well as changes to apply the highest marginal rate of tax to amounts received by certain related adult individuals from private corporations, where the amount is unreasonable, having regard to labour and capital contributions. The proposals elicited a wide-scale reaction not only from those in the tax community, but also from various business, professional and farming organisations whose members would be affected. Ultimately, only the latter proposals are moving forward. Lastly, significant changes to our voluntary disclosure programme were implemented that will have an effect on future potential relief for taxpayer non-compliance.
Residence and domicile
How is residence/domicile determined for tax liability purposes in your jurisdiction?
Canadian residents are taxed on their worldwide income, regardless of where it was earned. Non-residents are also subject to Canadian income tax if they earn employment income from providing services in Canada, carry on a business in Canada or dispose of taxable Canadian property.
Residence for tax purposes is determined by both statute and common law. The Income Tax Act provides that an individual who sojourns in Canada for 183 days or more a year is deemed to be a resident of Canada throughout the year. In addition, common law principles provide that someone will be a resident of Canada for tax purposes if the facts and circumstances of his or her relationship to Canada are such that the individual has a ‘taxable nexus’ with Canada. Factors that contribute to the finding of such a taxable nexus include physical presence, ownership of a dwelling in Canada, location of a family home, presence of business or social interests, mode of life and family ties and social connections by reason of birth or marriage.
Most of Canada’s income tax treaties contain ‘tie-breaker’ rules to determine residency if an individual is found to be a resident of more than one country under the relevant domestic law.
Describe the income tax regime in your jurisdiction (including tax base, rates, filing formalities and any exemptions, reliefs or deductions).
The federal Department of Finance is responsible for fiscal policy and tax legislation, including the Income Tax Act, whereas the Canada Revenue Agency is tasked with tax administration.
The federal and provincial governments in Canada impose income tax on the taxable income of individuals that reside in Canada at any time in the tax year. The four main sources of income under Canadian income tax law are business, property, office and employment.
Canada has a federal progressive taxation system, with marginal rates increasing as income increases. Each Canadian province has its own progressive marginal tax rates, with the result that taxpayers residing in different provinces are subject to different combined tax rates. In 2018 the combined federal provincial top marginal rate on regular income varied from 44.5% in Nunavut to 54% in Nova Scotia.
Individuals in Canada are taxed only on income in excess of a basic personal exemption. In addition to a basic personal exemption, numerous other tax credits and income deductions may be available to reduce a taxpayer’s overall income tax liability.
Canada does not provide for filing tax returns on a joint or ‘family unit’ basis.
Describe the capital gains tax regime in your jurisdiction (including tax base, rates, filing formalities and any exemptions, reliefs or deductions).
Capital gains can arise as a result of both actual and deemed dispositions, including on death or on a change of use of a property from business to personal use.
50% of capital gains (the difference between proceeds of disposition, less costs of disposition and tax cost) are included in income. 50% of capital losses (subject to certain ‘stop loss’ provisions) can be deducted from the amount of income included on account of capital gains. In general, capital losses can be carried forward indefinitely and applied against future capital gains. The 50% inclusion rate has the effect of taxing capital gains at half the rate applicable to other income.
The Income Tax Act sets out a number of mechanisms by which capital gains may be deferred or avoided.
Non-residents who dispose of taxable Canadian property may be subject to certain additional reporting and withholding obligations.
Inheritance and lifetime gifts
Describe the inheritance and gift tax regime in your jurisdiction (including tax base, rates, filing formalities and any exemptions, reliefs or deductions).
Canada does not have a gift tax per se. However, gifts of capital property by a taxpayer during his or her lifetime to a person with whom the taxpayer does not deal at arm’s length (including related persons) are treated as deemed dispositions of the property at fair market value proceeds.
In addition, subject to certain exceptions, a taxpayer is deemed to have disposed of all of his or her capital property immediately before death for fair market value proceeds. The deceased’s legal personal representative is responsible for filing the taxpayer’s terminal return, and the deceased’s estate is responsible for paying any tax owing as a result of this deemed disposition. [DR13]
What taxes apply to individuals’ acquisition and disposal of real estate in your jurisdiction?
In addition to income taxes that may be payable on the disposition of real estate, the provinces have the authority to impose transfer taxes on the acquisition or disposition of beneficial interests in real estate in Canada. Some provinces, such as Ontario, British Columbia and Quebec, have a graduated land transfer tax regime. The percentage of tax charged on the value of a transfer of real estate in these provinces ranges from 0.5% to 2%, increasing incrementally as the value of the transferred real estate increases. Some municipal governments, such as Montreal and Toronto, also impose an additional land transfer tax on the acquisition of real estate.
Other provinces, such as Alberta and Saskatchewan, charge fees on the transfer of legal title to real estate. These fees are relatively small compared to the aforementioned taxes levied on the transfer of beneficial interests in real estate.
In some circumstances, such as when a new home is sold to its first inhabitant, consumption taxes, such as the Goods and Services Tax, the Harmonised Sales Tax or an applicable provincial sales tax may be levied on the transfer.
Lastly, certain jurisdictions have imposed additional transfer taxes on the acquisition of real estate by non-residents of Canada.
Non-real estate assets
Do any taxes apply to the acquisition and disposal of other assets apart from real estate?
In Canada, consumption taxes, which include the Goods and Services Tax, the Harmonised Sales Tax and various provincial sales taxes, are levied on goods and services. While these taxes are collected at each stage of the production and delivery of goods and services, they are intended to be akin to a value added tax and be borne by the ultimate consumer. Intermediate parties that must pay these consumption taxes can usually seek reimbursement for amounts paid through a system of tax credits.
Additional amounts, called excise taxes or duties, are levied on particular goods, such as alcohol, tobacco, fuel-inefficient vehicles and automobile air conditioners.
Other applicable tax regimes
Are any other direct or indirect tax regimes relevant to individuals?
Municipal governments in Canada generate revenue with property taxes, which they impose on property owners within their respective boundaries.
In some cases, provinces levy property taxes in unincorporated or rural areas.
Are there any special tax planning considerations for individuals with a link to your jurisdiction?
There are a number of tax preferences that are available only to Canadian residents. By way of example, Canada affords its residents the opportunity to transfer property to spouses and common law partners on a tax-deferred basis. Residents are also entitled to certain tax credits and deductions in computing taxes payable.
Trusts, foundations and charities
Are trusts legally recognised in your jurisdiction? If so, what types are available and most commonly used?
Yes, Canada recognises various types of inter vivos trusts (trusts settled by a person during the person’s lifetime) and testamentary trusts (trusts created on a person’s death through the person’s will and commonly used to hold property for minors until they reach a particular age, as determined by the trust terms). Trusts may also be imposed between persons by the courts or by law (eg, constructive trusts or resulting trusts) for remedial purposes.
Commonly used inter vivos or testamentary trusts in Canada include family trusts (trusts set up to benefit a person’s family members), spousal trusts (a specific type of trust under which only the settlor’s spouse can receive the trust property during the spouse’s lifetime), bare trusts (trusts that are usually used to hold registered title for real property), blind trusts and alter ego or joint partner trusts (a specific type of trust available for settlors over age 65, used to provide for themselves and their families), among others.
What rules and procedures govern the establishment and maintenance of trusts?
As in other common law jurisdictions, a trust in Canada is created when a person (the settlor) transfers property to another person (the trustee) to hold the property and manage it on behalf of other persons (the beneficiaries), pursuant to terms established by the settlor in the trust instrument. Additionally, in Quebec, the trustee must accept the undertaking to hold and administer property to create the trust.
Trusts are governed by various rules and procedures, which are principally set out in the trust instrument. Outside of the trust instrument, provincial laws, judge-made law and Canada’s federal Income Tax Act provide other rules, such as the deemed disposition for tax purposes (but not necessarily the actual disposition) of trust property every 21 years, which triggers the payment of accrued but untaxed taxable capital gains, unless the property is rolled out to certain qualifying beneficiaries (usually at the trust’s tax cost). To qualify as a certain type of trust for income tax purposes, the trust must be established and maintained according to criteria and rules set out in Canada’s federal Income Tax Act.
How are trusts taxed in your jurisdiction?
A trust that is resident in Canada is considered to be an individual for income tax purposes. A trust must report income from any business or property that it holds and capital gains when trust property has been disposed.
The taxation of trusts is complex and varies depending on the type of trust. Generally speaking, there is either tax at the trust level or at the beneficiary level, and the amount of tax payable under a trust structure parallels the amount of tax payable by individuals. With certain exceptions, both testamentary trusts and inter vivos trusts in Canada are subject to a flat rate of tax equal to the highest marginal individual rate of tax (depending on the province where the trust is taxed, this can range from 44.5% to 54%). In addition, the transfer of property to form a trust may be taxable (for the transferor, depending on the tax attributes of the property transferred), except for transfers of property to certain kinds of trusts (eg, alter ego and joint partner trusts).
Foundations and charities
Are foundations and charities legally recognised in your jurisdiction? If so, what forms can they take?
Yes, Canada’s federal tax agency, the Canada Revenue Agency (CRA), determines what organisations can act as registered charities.
Registered charities can take one of three forms:
- charitable organisations;
- private foundations, which are controlled by a board with a majority of directors who are non-arm’s length (eg, family members); and
- public foundations, which are controlled by a board with a majority of directors who are at arm’s length.
In Canada, foundations must be registered as a type of charity.
Charities are different from other organisations that operate on a non-profit basis (eg, clubs, associations and societies). For example, charities must be registered with the CRA and can issue official donation receipts to donors that provide a credit (for individuals) or deduction (for corporations) for tax purposes.
What rules and procedures govern the establishment and maintenance of foundations and charities?
Provincial law and the Canadian federal Income Tax Act govern the establishment of charities (including foundations). The CRA registers and, together with the provincial authorities, regulates charities (which includes foundations).
To be registered, a charity must be established and operate exclusively for charitable purposes (relieving poverty, advancing education, advancing religion or benefiting the community in ways that Canadian courts have considered charitable) and, in general, cannot provide benefits to their members. A registered charity can use its resources only on its own activities or on gifts to qualified donees. The charity must also comply with the basic requirements set by the CRA, from keeping adequate records to observing anti-money laundering rules.
Within certain limitations, registered charities can carry out fundraising, political and social activities and may, if properly structured, conduct charitable activities outside of Canada.
How are foundations and charities taxed?
Registered charities in Canada (including foundations) are exempt from paying income tax. Charities can also issue official donation receipts to their donors, which allows individuals to receive a tax credit for donations made and corporations to deduct donated amounts from their income.
To maintain this favourable tax treatment, charities must comply with the CRA’s requirements, including filing an annual information return.
Anti-avoidance and anti-abuse provisions
What anti-avoidance and anti-abuse tax provisions apply in the context of private client wealth management?
Canada’s federal income tax legislation includes a number of specific anti-avoidance rules, as well as a general anti-avoidance rule (GAAR). While specific anti-avoidance rules may provide for pre-determined tax consequences resulting from their application, the application of GAAR allows for a redetermination of tax consequences in a manner determined appropriate. An ever-developing body of case law considering the application of anti-avoidance rules is emerging.
Anti-treaty shopping provisions are also a relevant consideration.
Provinces may also have anti-avoidance rules, most notably those designed to address transactions that are undertaken in order to inappropriately shift the tax burden from one (presumably higher tax rate) province to another.
Anti-money laundering provisions
What anti-money laundering provisions apply in the context of private client wealth management (eg, beneficial ownership registers)?
The Proceeds of Crime (Money Laundering) and Terrorist Financing Act imposes a variety of obligations on reporting entities. Reporting entities include banks, trust companies and persons and entities authorised under provincial legislation to engage in the business of dealing in securities or any other financial instruments or to provide portfolio management or investment advising services. As a result, many institutions in the wealth management business are subject to obligations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and the regulations made under that act. Key obligations include:
- client identification requirements, including requirements relating to beneficial ownership and determination of politically exposed persons and heads of international organisations;
- monitoring transactions to detect suspicious transactions and attempted transactions;
- record-keeping obligations;
- reporting certain types of transaction (including suspicious transactions, attempted transactions and large cash transactions) to the Financial Transactions and Reports Analysis Centre of Canada; and
- establishing a compliance regime.
In addition, these types of business are subject to requirements under other federal legislation relating to designated persons (eg, persons named on lists maintained pursuant to the Criminal Code and economic sanctions legislation).
The obligations described above apply to reporting entities, not to their customers, but of course these obligations have implications for the information that reporting entities will require their customers to provide.
With respect to beneficial ownership, the Department of Finance released in February 2018 a consultation paper entitled “Reviewing Canada's Anti-Money Laundering and Anti-Terrorist Financing Regime” that addresses, among other things, corporate transparency. The consultation paper provides that the Department of Finance is seeking views from stakeholders on, among other things, how to improve corporate ownership transparency and mechanisms to improve timely access to beneficial ownership information by authorities while maintaining the ease of doing business in Canada.
Wills and probate
What rules and restrictions (if any) govern the disposition of and succession to an individual’s property and assets in your jurisdiction?
An individual’s property generally vests in the individual’s personal representatives on death. If the individual has made a will and appointed an executor, the executor is the personal representative and the disposition of the property is governed by the terms of the will. If the individual dies without a will, the personal representative is the estate administrator appointed by a court of competent jurisdiction and the disposition of the property is governed by provincial and territorial intestacy rules. Under Quebec civil law, the administrator of the property of the deceased is called a liquidator, regardless of whether the deceased died testate or intestate. The liquidator is seized with the task of liquidating the succession, which is the civil law equivalent to the common law concept of the estate. In practice, the role of a liquidator closely approximates that of an executor or estate administrator.
Individuals with the requisite mental capacity are generally free to dispose of their property as they determine by will. However, if an individual does not make adequate provision for his or her dependants (including a spouse), these can claim financial support from the estate. In British Columbia, children who are not dependants can also make a claim for support. In some provinces, a spouse can also seek a division or equalisation of property in a similar manner to marriage breakdown, in lieu of the gifts provided under the will.
Certain property does not vest in an individual’s personal representative on death. If an asset permits a beneficiary designation (eg, life insurance, pension plans, certain registered savings vehicles), the asset passes directly to the designated beneficiary. Property held in joint tenancy with right of survivorship will generally pass directly to the surviving joint tenant by operation of law. However, joint tenancy does not exist under Quebec civil law.
What rules and procedures govern intestacy?
In the event of a full intestacy (an individual dies without a valid will) or a partial intestacy (an individual dies with a will that is valid but does not dispose of all of the individual’s estate), the distribution of the estate is governed by the applicable provincial statute. Provincial intestacy statutes generally divide the estate among the surviving spouse and issue of the deceased, or to the closest next-of-kin if there is no spouse or issue.
What rules and restrictions (if any) apply to the governing law of a will?
The construction of a will is generally governed by the law of the place where the testator is domiciled at the time the will is made.
Under common law, the formal validity of a will as it relates to moveable property is governed by the law of the testator’s domicile when the will is made; the formal validity of a will as it relates to immoveable property is governed by the law of the location of the immoveable property. In some Canadian jurisdictions, the common law has been amended by statute so that the law where the will was made or the law of the testator’s domicile, habitual residence or nationality may govern the formal validity of a will as it relates to both moveable and immoveable property.
The essential validity and effect of a will, and succession to property, is generally governed by the law of the testator’s domicile in the case of moveable property, and by the law of the location of the property in the case of immoveable property.
What are the formal and procedural requirements to make a will? Are wills and other estate documents publicly available?
A will (or codicil) must be in writing, signed by the testator at the end of the document and executed in the presence of two witnesses who are both present at the same time. An exception to this rule is the holograph will, which is a will entirely in the testator’s own handwriting and is valid in most provinces and territories. In all cases, the testator must have the requisite mental capacity, must have knowledge of the contents of the will and approve them, and must not have executed the will as a result of undue influence. In Quebec, a will can also be a notarial will, which must be signed before a notary and one witness.
Wills are not publicly available until they are probated. When a will is probated it becomes part of the public record unless the court seals the court file. A sealing order is the exception rather than the rule. A notarial will does not need to be probated – it is deemed authentic and is recorded in a public register.
Validity and amendment
How can the validity of a will be challenged? Can the will be amended after the decedent’s death?
An individual who has a financial interest in an estate, including an individual who would inherit in the event of an intestacy, can initiate a court application to challenge the validity of a will on the basis of:
- lack of testamentary capacity;
- invalid execution;
- absence of knowledge or approval of the contents of the will; or
- undue influence.
If an individual makes a valid will but does not make adequate provision for his or her dependants (including a spouse), they can claim financial support from the estate. In British Columbia, children who are not dependants can also make a claim for support.
A trust, including a trust in a will, can be varied under the applicable provincial statute governing the variation of trusts. Generally, a court can consent to the variation of a trust on behalf of classes of beneficiaries who cannot themselves provide consent, such as minors, unborn or unascertained beneficiaries and beneficiaries who are not mentally competent, if the variation benefits that class of beneficiaries.
In most provinces the beneficiaries of a trust can terminate the trust if they are all adults, mentally competent and together represent the entire beneficial interest in the trust.
How is the validity of a will established in your jurisdiction?
If a will meets the requirements of a valid will in the relevant Canadian jurisdiction, it is valid in its own right. However, the validity of the will can be confirmed by ‘probating’ the will. ‘Probate’ is a judicial process in which the original will is submitted to a court of competent jurisdiction by the executor named in the will (or the person seeking to be appointed as the executor if the person named in the will is unable or unwilling to act). In Quebec, a notary can also probate a will unless the will is being challenged. Although the requirements vary by province, the person propounding the will must generally submit an application in the prescribed form and give notice of the application to persons with a financial interest in the estate. If there are minors or persons who are mentally incapacitated, notice must generally be given to the appropriate government agency (eg, Children’s Lawyer, Public Guardian and Trustee).
In most cases, probate is granted on the basis of the written application without a formal hearing. A hearing may be required where an individual seeks to probate a copy of a will or a lost or destroyed will, and will be required if a person objects to the appointment of the applicant or challenges the validity of the will.
A tax or fee is generally charged when an application is made to probate a will. The fee may be a fixed amount or a percentage of the value of the estate, and is generally referred to as a ‘probate fee’ or estate administration tax.
In some Canadian jurisdictions, marriage revokes an existing will unless the will is specifically made in contemplation of that marriage. This is not the case in Quebec.
To what extent are foreign wills recognised? Do any special rules and procedures apply to establishing their validity in your jurisdiction?
A foreign will (including wills made in other Canadian provinces and territories) is generally recognised as a valid will and admissible to probate if, at the time the will was made, it complied with the requirements for a valid will under the law where:
- the will was made;
- the testator was domiciled;
- the testator had his or her habitual residence; or
- the testator was a national.
If a foreign will has been probated in a jurisdiction other than the relevant Canadian jurisdiction (including other Canadian provinces and territories), the foreign probate can be recognised by the relevant Canadian jurisdiction in a process that is similar to probating the will in the relevant Canadian jurisdiction in the first instance. As part of that process, the foreign executors must submit copies of the foreign probate that are certified by the issuing authority in the foreign jurisdiction. There may also be a requirement to post a bond as security.
What rules and procedures govern:
(a) The appointment of estate administrators?
The process for appointing an estate administrator (ie, where there is an intestacy) is similar to the process for probating a will. The individual (or individuals) who wish to be appointed as the estate administrators submit an application in the prescribed form to the court of competent jurisdiction and give notice of the application to persons with a financial interest in the estate. If there are minors or persons who are mentally incapacitated, notice must generally be given to the appropriate government agency (eg, Children’s Lawyer, Public Guardian and Trustee).
Provincial and territorial law generally sets out an order of priority for who may be appointed as estate administrator, with a spouse and next-of-kin having priority over persons who are not related to the deceased. The applicants may be required to post a bond and must generally reside in the jurisdiction.
Upon an intestacy in Quebec, the process for appointing a liquidator of a succession – the Quebec equivalent to both an estate administrator and executor – differs substantially from the process for appointing an estate administrator in the common law provinces. The sole heir of a succession is bound to accept the office of liquidator of the succession. If the succession has multiple heirs, the heirs can designate a liquidator by majority vote. These heirs are determined by a comprehensive scheme set out in the Civil Code of Quebec.
A tax or fee is generally charged when an application is made to appoint an estate administrator. The fee may be a fixed amount or a percentage of the value of the estate, and is generally referred to as a ‘probate fee’ or estate administration tax.
(b) Consolidation and administration of the estate?
The executor (in the case of a testate estate) or estate administrator (in the case of an intestate estate) is responsible for ascertaining the assets of the deceased, taking appropriate steps to secure them and, subject to contrary directions in a valid will, liquidating and investing the estate assets. The executor or estate administrator is required to keep adequate records of all dealings with the estate assets and to account to the beneficiaries of the estate.
Property that passes directly to a designated beneficiary (eg, life insurance, pension plan survivor benefits, registered savings plans), and property that passes to a surviving joint tenant by right of survivorship, does not form part of the estate. The executor or estate administrator is not responsible for the administration of those assets.
(c) Distribution of the estate to heirs?
In the case of a testate estate, the executor is responsible for distributing the assets of the estate in accordance with the terms of the will after payment of the deceased’s debts. The terms of the will may require the executor to establish trusts for beneficiaries, and the executor will often be appointed as the trustee of those trusts. In the case of an intestate estate, the estate administrator is responsible for distributing the assets of the estate in accordance with the applicable provincial or territorial intestacy statute after payment of the deceased’s debts.
Distribution should not occur until the relevant limitation periods for spousal or dependant claims have passed or those claims have been waived or released. In addition, provincial and territorial law may preclude the distribution of an intestate estate for a period of time, such as the first year of the estate.
(d) Settlement of the decedent’s debts and payment of any taxes and fees?
The executor (in the case of a testate estate) or estate administrator (in the case of an intestate estate) is responsible for ascertaining the deceased’s debts and paying them from the residue of the estate. An executor or estate administrator should publicly advertise for creditors of the deceased according to the practice in the Canadian jurisdiction where the deceased resided. Online tools are now available, in addition to the traditional method of advertising in local newspapers.
The executor or estate administrator is responsible for filing the deceased’s final income tax return , prior year’s tax returns and the estate’s income tax returns. Any taxes owing are paid from the residue of the estate.
If the residue of the estate is insufficient to satisfy the deceased’s debts (including taxes), they are charged rateably to any specific gifts in the will (eg, cash legacies or gifts of specific property) according to an order of priority. If the estate is insolvent, the estate is generally distributed on a pro rata basis among the creditors.
Are there any special considerations specific to your jurisdiction that individuals should bear in mind during succession planning?
A tax or fee is generally charged when an application is made to appoint an executor or estate administrator. The fee may be a fixed amount or a percentage of the value of the estate and is generally referred to as a ‘probate fee’. In the Canadian jurisdictions where the probate fee is a percentage of the value of the estate, testators may implement planning to reduce the value of the estate that will be subject to the probate fee, such as, for example, using beneficiary designations (eg, pension plans, certain registered savings plans or life insurance) and holding property in joint tenancy with right of survivorship. In some Canadian jurisdictions, multiple wills are used to govern different classes of assets, with those assets that can generally be administered without probate governed by a separate will. Alter ego trusts, spousal or common law partner trusts and joint spousal or common law partner trusts (which are prescribed trusts under the federal Income Tax Act) are also used for probate fee planning.
Special planning may be required for individuals who have an interest in a private corporation. Multiple wills may be used for interest in private corporations in some Canadian jurisdictions with high probate fees. Wills should include the necessary powers to engage in post-mortem planning to mitigate double taxation on the same economic value (ie, at the corporate level and the shareholder level). An ‘estate freeze’ is an inter vivos transaction in which a shareholder of a private corporate exchanges common (participating) shares for preferred (fixed-value) shares to limit the income tax liability that will arise on death, with future growth in the value of the corporation accruing to new common shareholders, either directly or through a discretionary family trust.
If a beneficiary is receiving social assistance, including provincial or territorial disability benefits, special trusts may be used in some Canadian jurisdictions to preserve eligibility for benefits. The federal Income Tax Act contains prescribed trusts, tax deferral opportunities and tax elections that can be used for certain disabled beneficiaries.
In Canada, a person is deemed to have disposed of their property immediately before death, which triggers accrued but unrealised capital gains. The federal Income Tax Act provides for a deferral of that tax if the deceased’s property is transferred to a spouse or common law partner or qualifying spousal or common law partner trust (a prescribed trust). There are also income tax deferral opportunities for certain registered savings plans that are transferred to a spouse or common law partner or financially dependent child or grandchild.
Capacity and power of attorney
Loss of capacity
What rules, restrictions and procedures govern the management of an individual’s affairs where he or she loses capacity and the grant of power of attorney in such cases?
To manage their financial affairs, capable persons can appoint a substitute decision-maker in a document called a power of attorney. The substitute decision-maker’s duties, powers, privileges, restrictions and term are set out in this document, in provincial legislation, and in rules developed by the courts. In Quebec, this document is called a protection mandate.
If a person has not made a power of attorney or protection mandate, an interested person can generally apply to the court to appoint, or be appointed as, a guardian over the incapable person’s financial affairs. In Quebec, this guardianship of a person lacking capacity can take one of three forms based on the degree of incapacity.
For healthcare decision making, most provinces provide for the ability of a person to give advance healthcare instructions or to appoint, while capable, another person to make healthcare decisions on the person’s behalf.
What rules, restrictions and procedures govern the holding and management of a minor’s assets until the minor reaches the age of capacity?
A person may be appointed as trustee of a minor’s property by statute, a will, a trust document or a court order.
Where such a person has not been appointed, parents in most provinces are generally allowed to manage small amounts of assets in trust on behalf of their minor child. For larger amounts, each province has a dedicated office (called the Public Trustee, Children’s Lawyer or Public Guardian and Trustee) to hold the assets on behalf of the minor, unless an interested person (eg, the minor’s parents) applies to the court to appoint, or be appointed as, a guardian over the minor’s property. When a person applies to become the private guardian of the minor’s property, the provincial office that represents the minor’s interests will generally be involved in the application.
Until the minor reaches the age of majority, trustees of the minor’s property are required to manage the property prudently, with the utmost care and according to the terms of the trust or court order. When the minor reaches the age of majority, he or she is generally entitled to receive the whole of the trust property, unless the property is governed by the terms of a trust that provide otherwise. The age of majority is either 18 or 19, depending on the province. In Quebec, a minor is also entitled to receive the whole of the trust property on emancipation.
Marriage and civil partnerships
What matrimonial property regimes are recognised in your jurisdiction?
In the event of marriage breakdown, married spouses have statutory claims to a division or equalisation of property. In some Canadian jurisdictions, property is divided between the spouses. In other Canadian jurisdictions, the increase in value of the spouses’ respective property during the marriage is equalised through a cash payment, rather than a division of actual property. Property acquired by gift or inheritance is generally not divided or equalised. The property that is subject to division or equalisation, and the property that is excluded from equalisation or division by statute, or that may be excluded through a domestic contract, is determined by the provincial or territorial statute.
In addition to statutory claims, both married and common law spouses may claim an interest in property or compensation on the basis of unjust enrichment or resulting trust. A constructive trust may be imposed as a remedy for unjust enrichment.
Are same-sex marriages and/or civil partnerships recognised in your jurisdiction?
Yes, same-sex marriages are recognised in all provinces and territories.
Is there a legal distinction between legitimate and illegitimate children in terms of estate and succession planning?
No. In addition, in some Canadian jurisdictions children conceived after the death of the deceased using preserved genetic material are considered children for succession purposes, if the requirements of the applicable statute are met.
Is there a legal distinction between natural and adopted children in terms of estate and succession planning?
No. In addition, in some Canadian jurisdictions children conceived after the death of the deceased using preserved genetic material are considered children for succession purposes, if the requirements of the applicable statute are met.