Inheritance Law in Canada

and German-Canadian succesions

I. Which law is applicable?

In case a succession affects both Germany and Canada, firstly, the applicable jurisdiction must be determined.  For the lack of a genuine “international inheritance law”, the applicable law is determined by the affected states themselves.

Attorney Swane: + 49 (0) 30 609 82 88 55

1. Canada:

Canada is a federal state composed of ten provinces and three territories. The provinces possess exclusive legislative power concerning in matters of civil law within their territory. Thus, the Canadian Inheritance law is not coherent a coherent legal framework. In fact, two legal system co-existist: the civil jurisdiction of the province of Quebec that is largely based on the French legal tradition, as well as, the Canadian common law system in the rest of Canada, that widely corresponds to the Anglo-American common law.

To determine the applicable law, both legal systems distinguish movable and immovable assets:

Regarding immovable assets the location of the property is decisive; the legislation of the state where the property is located is the one to be applied. Movable assets are inherited under the law of the location of the last domicile of the deceased.

1st Case: A German citizen, who lived in Berlin, bequeathed a house located in one of the Canadian provinces. From a Canadian perspective regarding the immovable estate, Canadian law is applicable, whereas concerning the movable assets German Inheritance law must be applied.

2nd Case: A German citizen who lived and deceased in Vancouver and bequeathed an apartment located in Vancouver and his car. Concerning both the apartment and the car from a Canadian perspective, Canadian inheritance law must be applied.

Some of the provinces grant a choice of laws.

2. Germany

Germany as a member state of the European Union has ratified the Regulation of Successions. To facilitate cross-border-successions within the European Union, the European Parliament and the Council passed the Regulation of Successions (Regulation No 650/12), applicable to persons deceased on or after 17th, of August 2015.

According to the EU Regulation, the applicable jurisdiction is determined by the last “habitual residence” of the deceased.

However, in case that a Canadian citizen deceased, the German law refers to the International Canadian Inheritance law. Yet, a referral from the Canadian Private law based on Art. 4 (1) EGBGB to the German law, may occur.

Case No. 3: A Canadian citizen, residing in Berlin (last domicile) deceased. From a German perspective, due to the last residence (domicile) of the deceased in Berlin, German law must be applied.

However, the question concerning the applicable inter-Canadian legal system remains. According to Art. 4 (3) EGBGB this is regulated by the Canadian law.

II. Matrimonial Property Regime:

The matrimonial property regime, depending on the respective legal order, exercises a significant influence on the economic outcome regarding the distribution of the estate. For this purpose, please find the subsequent overview concerning the statutory property regimes, which may be modified.

1. Common Law Provinces

The statutory property regime in the common law provinces is similar to the German community of accrued gain (Zugewinngemeinschaft).

During the time of marriage, the assets of the spouses remain separated. In case of dissolution of the marriage due to death or divorce, a division of the property is performed. Yet, the laws of the single provinces may vary significantly concerning the compensation and the granted claim in favor of the surviving spouse.

2. Québec

The matrimonial statutory regime in Québec is the so-called société d’acquêts. The matrimonial property regime comes into existing with the death of one spouse and is comparable with a communal matrimonial property regime. During the marriage, the principle of separated assets prevails. After the dissolution of the matrimonial property regime due to the death of one of the spouses,  the communal property regime treats in. The assets of the spouses will be separated due to private assets and common/joint assets. The successors take the place of the deceased. Thus, before the division of the estate the matrimonial property is divided beforehand. The surviving spouse is granted a beneficial interest concerning the shares of the minor children.

III. Substantive Law

1. Intestate succession

a. Common Law Provinces

Within the Common law provinces the surviving spouse, as well as the descendants of the deceased, his/her parents, siblings and further relatives are appointed as legal successors to the estate.

If the deceased does not leave any children, in most Common law provinces, the surviving spouse is entitled to inherit the entire estate.

The surviving spouse inherits half of the estate alongside one child and at least, two-thirds of the estate alongside several children. The descendants of the deceased regularly supersede further successors.

Moreover, the surviving spouse receives a „preferential share“, with a varying amount in the different provinces.

b. Québec:

Within the Québec province, the intestate succession is based on a Parentelsystem, consisting of three classes (orders) with fixed inheritance shares. The CCQ (Civil Code of Québec) contains norms about calculating degrees of relationship, and about representation. The first class of legal heirs encompasses the surviving spouse and the children. Moreover, the surviving spouse is also part of the second class, alongside privileged ascendants (parents) and privileged collaterals (siblings). The third order consists of all further ordinary ascendants and collaterals.

In case the spouse inherits alongside the children, the spouse receives one-third of the estate, the descendants receive the remaining two-thirds of the estate. If the surviving spouse inherits alongside the successors of the second class, he receives at least, two-thirds of the estate. The surviving spouse inherits the entire estate if the deceased did not leave children and if no other privileged ascendants or privileged collaterals exist.

2. Testate succession

In general, every person with the capacity to establish a testament may dispose over his/her entire assets via testament.

The capacity to establish is granted to every person upon the age of 19. Succession contracts and joint testaments are generally invalid.

Due to the fragmentation of the different Canadian jurisdictions, different forms of testaments are acknowledged as valid. The handwritten testament is recognized in most provinces. Furthermore, the public testament and the two-witness testament are acknowledged. These testaments are also valid under the Québec regulations.

Within the Common law provinces the successors are not appointed as heirs, but granted contributions of assets, comparable to a legacy. Those contributions must be granted by the executor of the estate.

3. Forced Heirship

a. Common-Law Provinces

In general, the Canadian provinces do not follow a forced heirship regime. However, the legislation provides economic security for certain relatives by granting them beneficial claims. In most provinces the surviving spouse is entitled to receive the so-called „preferential share“, up to 200.000 CAD. Disinheritances shall be mitigated through beneficial entitlements. All provinces have the so-called Dependent ´s Relief laws, which entitles the surviving spouse and the children to claim certain benefits.

b. Québec

The legislation of Québec is based on the principle of freedom of disposal. The testator thus may disinherit even close relatives. Yet, the surviving spouse is safeguarded by the patrimoine familial (family patrimony). Furthermore, close relatives may have support claims.

IV. Proceedings (administration)

Whereas the public execution of the estate is considered unusual in Germany, it is statutory under Canadian law.

1. Common Law Provinces

Within the Common law provinces, the estate is distributed by the personal representative. The personal representative may be appointed by testament “estate trustee with a will “(or executor) or alternatively, he may be appointed by the probate court “estate trustee without a will” (or administrator).

The proceedings are formed as a probate succession following the English provisions. The personal representative has to submit an application for probate at the competent court. The probate determines the validity of the testament and the appointment of the personal representative. Subsequently, the personal representative administrates and distributes the estate.

2. Québec

The proceedings require two steps: Firstly, the liabilities of the estate must be balanced (liquidation), afterwards the estate will be distributed by an appointed representative (partage).

V. Succession Taxation

The Canadian Tax System does not contain an Inheritance tax. However, the estate is a capital gain and thus, subject to the Income tax. The estate is treated as a disposal. If the deceased lastly resided in Canada the taxation includes his assets of the deceased around the world. On the other hand, if the deceased lastly resided in Germany only the assets located in Canada are subject to the Canadian taxation. The taxation of the estate is based on the Capital gains tax, which considers the actual market value as the decisive factor. The tax rate varies between 17% and 39%. Furthermore, the provinces are also entitled to levy taxes. The German-Canadian tax agreement does not contain any provisions concerning the inheritance tax. Thus, a double taxation may occur.

Do you need help? Please do not hesitate to contact us

Berlin
Phone: + 49 (0) 30 609 82 88 55
Rechtsanwalt Torben Swane
German Probate & Wills Lawyer, Specialist in International Probate and Estate Planning

Welserstraße 10-12
10777 Berlin-Schöneberg

Email: info@erbrecht-berlin.eu

Hamburg
Phone: + 49 (0) 40 30 39 18 75
Rechtsanwalt Christian Block
German Probate & Wills Lawyer, Specialist in International Probate and Estate Planning
 Email: block@fachanwalt-erbrecht.eu

Friesenweg 38
22763 Hamburg

Office Hours:
Mo-Fr      10:00 – 18.00 Uhr