Estate Planning when moving from the U.S. to Quebec

In a province ripe with culture, many Québecers living abroad consider a future in returning home. Whether it’s the French language, European architecture, half million lakes, maple syrup, poutine, or to be close to family, many Québécois possess the desire to relocate to their roots. The assets they’ve accumulated in their absence dictates careful financial planning, especially when relocating from the U.S. This blog focuses on some of the estate planning needs one must address in such a move.

Embedded in the fabric of Québec’s estate organization is the Civil Law system. This is unique to Québec as all other provinces and territories within Canada operate under Common Law. The judicial system under Common Law is an evolution of laws based upon precedents established in verdicts based on previous case decisions; precedent develops the interpretation and application of law over time. Civil Law focuses on a comprehensive codification of rules. As such, the courts first refer to the Civil Code of rules before weighing against precedent from previous decisions. Whether an individual or couple is moving from another province or from the U.S., it stands to reason that the foundational principles of Québec’s Civil Law tradition necessitate a reconstruction of one’s estate plan.

Take, for example, a Canadian couple living in the U.S. with a young child who is a dual citizen. The family contemplates returning home (to Québec) to raise their child close to relatives. The parents took prudent steps to assemble a U.S.-based estate plan inclusive of a trust, wills, powers of attorney, and healthcare directives. Furthermore, they executed their estate plan by retitling/settling applicable assets into their trust and added beneficiary designations to relevant assets and accounts to mitigate issues with probate. The moment this couple re-establishes Québec residency, the law of the province (Civil Law) supersedes the laws of the former state in which the couple had lived.

“Movable vs Immovable Property”

Per Québec’s Civil Laws there is a big difference between the rules that govern the transfer of “movable” vs. “immovable” property at death. As its name suggests, “movable” refers to tangible property that can easily be transferred (ex. vehicles, computers, investments, and bank accounts, etc.). On the other hand, “immovable” property is not easy to transport and can lose its original design and shape (ex. homes, land, trees, etc.). The law of the owner’s place of domicile and death dictates the transfer of “movable” property whereas the laws of the locality in which “immovable” property is located will govern the succession of that asset.

In the aforementioned example of a couple moving from the U.S. to Québec, their asset base consisted of an IRA, Roth, 401k, RRSP, LIRA, taxable investment, and bank accounts as well as a home in Florida. In this case, all assets are considered “movable” other than the home. This is an important distinction given what follows.

Account Titling and Beneficiary Designations

The province of Québec does not recognize joint account titling, nor do they honor beneficiary designations, unless the asset is an insurance product or an RRSP/RRIF/TFSA/RDSP issued by an insurance or trust company[KR1] . Along those lines, if these tax deferred account vehicles are structured as a fixed-term annuity, they can pass by beneficiary designation. In Québec, a beneficiary is called a “legatee.” Note that where an individual is resident in Québec, it is not possible to name a legatee of a registered plan who is living outside Quebec. The “movable” assets previously discussed, and their associated titling and beneficiary designations, would be rendered invalid according to Québec estate laws. This could create considerable tax and estate inefficiencies for loved ones left behind unless an official Québec estate plan was constructed. The “immovable” assets in the previous example (Florida home) would be governed by that state’s law, and as such could retain its trust titling. That said, there can be significant issues with retaining a U.S. revocable living trust as a Québec resident. For more information on Canadian resident tax implications of a U.S. trust see —What do I do with my U.S. Revocable Trust if Moving to Canada?.

Québec Estate Planning – Notarial Will

Let’s return to the family moving from the U.S. to Québec. Certain “movable” property would need to remain in the tax jurisdiction that governs the account (ex. IRA, Roth, 401k). It can be challenging to maintain assets in the U.S. as a non-resident. See “Residents of Canada: Tax Ramifications of Being Forced to Liquidate a U.S. Retirement Account“. From an estate standpoint, if the Québec will is drafted properly, the issue of non-recognition of a beneficiary on these cross-border retirement accounts can be rectified. If the proper form of a will (Notarial) is executed, then “probate” can also be circumvented. In an ideal world, the Québec will mirrors the beneficiary designations at the U.S. and Canadian financial custodians so there are no inconsistencies from the laws in which the owner and asset reside. If a spouse were named legatee on the retirement account, the Canadian spousal tax-free rollover rules would apply and tax would be deferred until the death of the surviving spouse. The Notarial Will does not have to be verified following the death of the testator. In addition, there are no probate fees in Québec, and probate is not required if the will has been prepared by a Notary.

Québec Estate Planning – Mandates

A mandate is a specific type of contract whose general rules are set out in the Civil Code of Québec. A mandate can also be referred to as a power of attorney. The person who is granting the mandate is the mandator and the person representing the mandator is the mandatary. This mandate can be drafted by a lawyer in Québec and is similar to a non-continuing power of attorney for property.

Québec Estate Planning – Protection Mandate

This mandate is given to a person in anticipation of the mandator’s incapacity. These powers are not granted until the court or a notary approves the occurrence of the incapacity. Aside from the naming of the mandatary and their substitute, the protection mandate can include instructions concerning:

  • Scope of the mandataries’ powers;
  • Family protection (ex. appointment of a tutor if the client is the parent of a minor child, authorize the mandatary to use the mandator’s assets for the benefit of the spouse and children);
  • Access to medical records;
  • Consent to organ donation;
  • End-of-life care;
  • Accommodation (ex. whether the person wants to stay home or be placed in a nursing home);
  • Management of the business if any;
  • Maintenance and management of property;
  • Procedures for reporting on the administration of the property to prevent abuses (rendering of accounts).

Québec’s Estate Planning – Advanced Medical Directives

In addition to the protection mandate, Québec residents can also write Advanced Medical Directives allowing the mandator to express their consent to care deriving from the Act Respecting End-of-Life Care. Health professionals that have access to them are obliged to comply. The terms of the directives can be modified at any point, provided that the mandator has capacity.

In Conclusion – While the concepts are similar, there are significant discrepancies when comparing Québec estate planning to that within the U.S. and the remaining Canadian provinces and territories. Even the terminology is different: executor vs. liquidator, beneficiary vs. legatee, power of attorney vs. mandate.

Moving from the U.S. to Canada is a complex endeavor and one that penetrates all layers of cross border planning inclusive of the estate components. Moving from the U.S. to Québec has additional layers of challenges. Wisdom requires a prudent approach in seeking guidance from cross border experts. For more information contact Cardinal Point.

 [KR1]My notes also state that an RRSP, RRIF, TFSA, or RDSP structured as a fixed-term annuity can pass by beneficiary designation.

You may wish to add this as well.