Special Considerations for Complex Estates

Not all estates are straightforward. Some involve business interests, cross-border assets, blended families, ongoing trusts, or assets that are difficult to value or divide. These complexities demand additional care, specialized knowledge, and a willingness to engage the right professionals at the right time. This chapter addresses the most common advanced scenarios: estates with business interests, insolvent estates, U.S. and international assets, digital assets and cryptocurrency, and estates involving Indigenous land or matrimonial property. For each, it provides practical guidance on how to navigate the issues and where to seek help.

This chapter explores several advanced estate scenarios that commonly arise and offer guidance on how to navigate them. These cases often require specialized advice and a higher level of coordination.

1. Business Interests

When the deceased owned a business (whether as a sole proprietor, corporate shareholder, or business partner) the executor may face challenges related to:

• Maintaining business continuity during administration

• Determining fair market value

• Handling buy-sell agreements or shareholder disputes

• Assuming temporary directorship responsibilities (and related liability)

This section covers what is required to wind up, transfer, or preserve business operations, and when to bring in legal and valuation professionals.

2. Foreign Property and Cross-Border Issues

If the estate includes foreign real estate, financial accounts, or investments (e.g., a vacation home in Arizona or bank accounts in Europe), the executor must often comply with:

• Ancillary probate or legal recognition in the foreign jurisdiction

• Foreign tax reporting requirements

• Possible estate tax exposure (e.g., U.S. estate tax on U.S.-situs assets)

Practical steps to manage these cross-border obligations and minimize risk follow.

3. Family Disputes and Blended Families

Estates involving second marriages, stepchildren, or estranged relatives can lead to emotional tensions or legal challenges. Executors must be aware of:

• Spousal or dependent support claims under provincial law

• The potential for wills variation actions (especially in provinces like B.C.)

• The need for neutrality and clear communication when relatives are in conflict

This section will provide insight on how to balance legal obligations with family sensitivities.

4. Unique or Hard-to-Value Assets

Some estates contain non-traditional assets that require specialized handling, such as:

• Intellectual property (e.g., book royalties or patents)

• Digital assets (e.g., cryptocurrency, NFTs, monetized YouTube channels)

• Collectibles or high-value personal items (e.g., rare art, sports memorabilia)

• Loyalty programs or reward points

Valuation, transfer, and liquidation strategies for these non-standard holdings follow.

5. Trusts and Ongoing Management

If the will creates ongoing trusts, such as for a minor child, spouse, or disabled beneficiary, the executor may be responsible for:

• Establishing the trust

• Funding and registering it properly

• Possibly serving as trustee for the long term

This section introduces what is involved in trust setup and administration, and when to consider appointing a corporate trustee.

6. Insolvent or Illiquid Estates

Some estates are asset-rich but cash-poor, or they have more liabilities than assets. These situations create challenges concerning:

• Paying immediate expenses or taxes

• Avoiding premature distributions

• Deciding which assets to sell (and in what order)

This builds on earlier sections to address strategies for managing liquidity risk, creditor claims, and preserving estate value under pressure.

By exploring complex estate categories, you will gain knowledge that will help you to anticipate and manage estates that go beyond the basic model. These cases often demand:

• Tailored strategies

• Skilled professional support

• Clear, consistent communication with beneficiaries, who may not fully understand the challenges you’re managing on their behalf

Business Assets in the Estate

If the deceased was an entrepreneur, business partner, or corporate shareholder, their death may leave you, as executor, temporarily responsible for managing or winding up the business. This can significantly increase both the complexity of estate administration and your personal exposure.

Key Considerations for Executor-Managed Businesses

1. Authority to Act

• Sole Proprietorship: The business assets (e.g., equipment, inventory, goodwill) are part of the estate. As executor, you have direct control to operate, sell, or wind up the business.

• Corporation (Sole Shareholder): The deceased’s shares are estate assets. As executor, you control those shares, which typically gives you authority to elect yourself (or others) as directors/officers.

• Partnership: Review the partnership agreement. It likely outlines procedures for a partner’s death, e.g., automatic dissolution or mandatory buyout by surviving partners under a fixed formula.

2. Continue or Wind Up the Business?

You must quickly assess whether to:

• Continue operations (e.g., if beneficiaries plan to inherit and run the business)

• Sell the business as a going concern

• Wind it up and liquidate assets

Factors impacting the decision include profitability, presence of capable managers, and beneficiaries’ intentions or capabilities.

3. Risk Management

Operating a business involves legal and financial risk, especially if you step in as a director or officer. You may be personally liable for:

• Unpaid wages

• Source deductions and HST/GST remittances

• Environmental or regulatory obligations

Consider these immediate steps:

• Maintain or obtain appropriate business insurance.

• Ensure all statutory filings and payroll are current.

• Seek legal advice before assuming formal corporate roles.

4. Use of Management

If you lack business expertise, rely on:

• Existing management (if trusted and competent)

• Temporary professional management

• The will may authorize continued business operation and hiring of employees or advisors.

5. Valuation and Beneficiary Fairness

Obtain a formal business valuation if:

• The business is to be sold

• Some beneficiaries will receive the proceeds of the sale and others will not

A formal valuation ensures fairness and tax reporting accuracy. The valuation should consider tangible assets (such as inventory, client lists, earnings) and intangible assets (such as goodwill).

6. Buy-Sell Agreements

Check for:

• Shareholder agreements

• Partnership agreements

• Life insurance tied to buy/sell provisions

These contracts may require a sale to remaining partners or shareholders at a pre-agreed price. In this case, your role may be limited to facilitating the sales process and ensuring compliance.

7. Tax Issues

Business assets can create significant tax implications:

• Capital Gains on Shares: When an individual dies owning shares of a private corporation, they are deemed to have disposed of those shares at fair market value immediately before death. This can trigger a capital gain on their final personal tax return (T1). If the shares qualify as Qualified Small Business Corporation (QSBC) shares, the executor may be able to claim the Lifetime Capital Gains Exemption (LCGE) on the deceased’s final return. As of 2026, the LCGE shields up to $1,275,000 of eligible capital gains from taxation (indexed annually). Note that this exemption is only available to individuals (including through their final return) and cannot be used by the estate itself on gains realized after death (e.g., from a sale reported on the estate’s T3 return). For that reason, tax planning upon or before death is key to making full use of the exemption, especially if the estate intends to sell the business posthumously.

• Ongoing Income: Any income earned post-death (from sole proprietorships) is reported on the estate’s T3 return. For corporations, income remains corporate but the estate now controls the company.

• Terminal and Estate Returns: Final business income (pre-death) must be reported on the deceased’s terminal return. Post-death income from continued operations or sale should be tracked and reported accordingly.

• GST/HST on Sale: If business assets are sold, GST/HST may apply. An accountant should advise.

8. Transferring the Business to Beneficiaries

If the will gives the business to a specific beneficiary:

• Transfer of shares may be tax-deferred (e.g., spousal rollover or certain intergenerational transfers of farming/fishing/small business shares).

• If multiple beneficiaries are to share a business, consider practical implications of co-ownership, or whether it is more appropriate to sell and divide proceeds.

9. Separate Accounting and Good Recordkeeping

• Keep business records separate from other estate records.

• Continue to use the business bank account (not the estate account) for operations.

• Maintain clear records of income, expenses, payroll, and cash flow.

10. Professional Support

Immediately involve:

• The deceased’s accountant (for historical context and continuity)

• A corporate lawyer (for share transfers, compliance, contract review)

• A business valuator or broker (if a sale is anticipated)

Tip: If the business is to be sold, a broker or M&A advisor may maximize its value.

11. Executor Compensation for Business Management

Actively managing a business goes beyond routine executor duties. Courts may award an additional fee or salary, especially if you oversee operations over a prolonged period.

• If the will authorizes compensation for business management, follow its terms.

• If not, document your time and responsibility to justify enhanced compensation.

Case Example: Jane’s Manufacturing Company

Jane dies owning 100% of a small incorporated manufacturing business. Her will leaves everything equally to her two children, neither of whom has business experience.

As executor, you:

1. Engage the company’s accountant and general manager to assess operations and ensure payroll and suppliers continue to be paid.

2. Appoint interim directors (yourself and possibly one of the children) after confirming authority via probate and share control.

3. Commission a business valuation and explore whether a third-party sale is possible. If one child wishes to take over, structure a buyout with legal advice and tax planning.

4. Market the business as a going concern to preserve goodwill and employee retention. Use a broker or M&A advisor.

5. Coordinate sale proceeds into the estate and distribute to the children. If one child buys out the other, equalize through other assets.

6. Work with the accountant to use available LCGE to reduce tax burden.

7. Document all steps and include the documentation in your executor’s accounts when proposing final compensation.

Managing a business within an estate is high-stakes and often high-effort. It requires swift action, strong communication, and professional support. If handled carefully, it can preserve or even enhance the legacy the deceased worked so hard to build.

Foreign Property and Cross-Border Issues

Many Canadian estates include property located outside Canada, such as:

• Real estate in another country (e.g., a Florida condo, or ancestral land abroad)

• Bank or investment accounts held offshore

• Shares in foreign or multinational companies

• Situations where the deceased was a non-resident, dual citizen, or subject to another country’s inheritance laws or taxes

These situations introduce special legal, tax, and logistical challenges that executors must manage carefully.

Key Considerations

Foreign Probate (Ancillary Grants or Resealing)

A Canadian probate grant has no authority outside Canada. Most foreign jurisdictions require a local legal process to recognize the Canadian will and authorize the executor. For example:

• U.S. real estate typically requires ancillary probate in the relevant state, handled by a local attorney using the Canadian will and probate.

• Some Commonwealth countries may allow resealing of a Canadian grant (a simplified recognition process).

Tip: Always check the local legal requirements.

Local Inheritance and Succession Laws

In civil law countries (e.g., France, Spain), forced heirship rules may override the will. Real property is generally governed by the law of the jurisdiction where the property is located, while personal property is often governed by the deceased’s domicile, but this varies. Legal counsel in each jurisdiction is essential.

Foreign Tax Obligations

• United States: If a non-U.S. citizen and non-U.S. resident dies owning U.S.-situs assets with a value above $60,000 USD, the estate may need to file a U.S. estate tax return for nonresidents (Form 706-NA), even if no tax is ultimately payable. However, under the Canada-U.S. Tax Treaty, Canadian estates may be able to claim treaty-based relief, often reducing or eliminating U.S. estate tax, but filing may still be required depending on the value and nature of U.S.-situs assets. For 2026 decedents, the U.S. basic exclusion amount is $15,000,000 per person ($30,000,000 for married couples who have elected portability). The One Big Beautiful Bill Act, passed in July 2025, extended these higher limits by repealing the previously scheduled sunset to approximately $7 million (IRS, Tax Year 2026 Inflation Adjustments). These amounts are indexed annually and can change. Confirm current thresholds with a cross-border tax advisor.

• U.S. Citizens or Green Card Holders: These individuals are taxed on worldwide assets, and full U.S. estate tax filings are required.

• Other countries may impose inheritance or estate taxes (e.g., the U.K. or many EU countries). Some taxes may be creditable in Canada to avoid double taxation.

Repatriating Funds

Once foreign assets are liquidated or collected, you must transfer them to the Canadian estate account. Consider:

• Currency exchange timing and rates

• Proper accounting in Canadian dollars (CAD)

• Documenting all conversions for estate records

Foreign Debts

Debts tied to foreign assets (e.g., a mortgage on a U.S. condo) are generally settled in the local jurisdiction before any net value is brought back to Canada.

Civil Law vs Common Law Administration

In some jurisdictions, the executor concept doesn’t exist. Instead, heirs inherit directly and may need to act collectively or through a court-appointed administrator. For example:

• In Quebec, a “liquidator” performs executor duties but may need consent from heirs for certain decisions.

• In parts of Europe, the executor may only facilitate local heirs claiming their inheritance.

Authentication and Translation

• Certified translations of the will and probate documents may be required.

  • Since January 2024, Canada has been a party to the Hague Apostille Convention. An Apostille certificate is now the standard method for authenticating Canadian documents for use abroad, replacing the older authentication and consular legalization process for most destinations. Requirements still vary by document type and receiving jurisdiction, so executors should confirm with the receiving authority.

Professional Guidance

Engage foreign lawyers, notaries, and tax advisors to manage local compliance. Canadian executors are not required to travel internationally; local counsel can act under limited powers of attorney.

International Example

John, a resident of British Columbia, dies owning:

• A home in Vancouver

• A condo in Arizona

• A U.S. investment account

Steps:

1. Probate the will in B.C. to obtain a Canadian grant of probate.

2. Hire an Arizona attorney to obtain ancillary probate, as U.S. courts generally won’t recognize Canadian grants.

3. File Form 706-NA if total U.S.-situs assets exceed $60,000 USD. Use the Canada-U.S. tax treaty to claim treaty-based relief, typically via a prorated unified credit. For 2026 decedents, the basic exclusion amount is $15 million USD per person (IRS, Tax Year 2026 Inflation Adjustments). Relief is subject to specific filing requirements and professional advice. Treaty relief is fact-specific and may be limited or prorated based on worldwide assets. Get cross-border tax advice before distributing.

4. Sell the Arizona condo. If the estate sells U.S. real estate, FIRPTA withholding generally requires the buyer to withhold 15% of the amount realized on the disposition, subject to exceptions and withholding certificate processes.

5. Repatriate proceeds to Canada, report capital gains on the Canadian final return, and claim foreign tax credits for any U.S. taxes paid.

6. Transfer or liquidate the U.S. investment account according to the policies of the financial institution. Some require U.S. probate, while others may accept notarized Canadian probate documents with a Medallion Signature Guarantee or Apostille.

Pitfall to Avoid

If you distribute the estate before dealing with foreign obligations (e.g., unpaid tax or probate issues abroad), you risk personal liability as executor. Always investigate the legal and tax requirements in every country where the deceased held assets.

Conclusion

Estates with foreign elements require diligence, planning, and collaboration with international professionals. Although they add complexity, these estates can be successfully administered by addressing each jurisdiction systematically and with proper legal support.