By: Christopher Arakaky  [8/15/22]

A consequence of living in an interconnected world is that there are now more considerations in planning for estates. As people cross borders for employment, marriage, quality of life, reunification, business, etc., their estates often accumulate property located in different countries. American citizens and lawful residents may have assets in foreign countries, just as temporary workers and non-permanent residents might acquire domestic assets while in America. 

One of the major problems this presents is the administration of an estate after death. The United States shares a common law legal system with the United Kingdom, but the vast majority of the rest of the world does not. For example, a living revocable trust is an excellent way to avoid probate if you live in Virginia and have a second home in Maryland. It may even be sufficient if you have a second home in Canada or the United Kingdom. However, if you own a property in a country that does not recognize the legal concept of a trust, there is a good chance that it will be subject to that nation’s probate process (as to that property), notwithstanding the fact you have a living revocable trust set up domestically.

Unfortunately, there is not much you can do to overcome this. To ensure the transition of property goes as smoothly as possible, you should prepare ahead of time by consulting an attorney licensed to practice law in the country in which the property is located. Learn as much as you can about the legal process, including the appointment of the personal representative of the estate, which filings must be made and when they are due, if there is an expedited probate process available under certain consequences, etc. Depending on the laws of the foreign jurisdiction in question, it may even be better to draft a stand-alone last will and testament under that country’s laws apart from your American estate planning documents.

Another issue requiring consideration is tax planning. U.S. citizens and lawful permanent residents are subject to the federal estate tax exemption ($12.06 million for 2022). However, the exemption for non-resident aliens is drastically smaller ($60,000 for U.S. situated assets, with marginal tax rates ranging from 18 percent to 40 percent). Complicating matters even more, a non-resident can be considered “domiciled” in the United States for estate planning purposes if they have a “substantial presence” in the U.S. In this case, the good news is they would be subject to a higher exemption applied to U.S. citizens and permanent residents. The bad news? Their worldwide assets could be subject to the U.S. federal estate tax. 

Fortunately, the United States is involved in several international treaties with certain nations which allow somebody with assets in multiple jurisdictions to avoid double-tax issues faced by both non-residents and U.S. citizens/permanent residents. The unlimited marital deduction also enables you to pass on your assets tax-free to your spouse if he or she is an American citizen, regardless of your domicile, residency, or size of your estate.

International estate planning is an incredibly nuanced endeavor, especially on the tax side. A thorough plan for an estate with international assets will likely include input from domestic and foreign attorneys, CPAs, and financial advisors.

Dunlap Bennett & Ludwig’s estate planning lawyers have managed complex estate planning strategies and can talk to you about your priorities and needs. No matter what works best in your case, the important thing is that your plan is tailored to fit your situation. To learn about how Dunlap Bennett & Ludwig can assist you with your estate planning needs, contact us by calling 800-747-9354 or by emailing clientservices@dbllawyers.com


Tagged with: , , , , , , ,

Posted in: Estate Planning

  • Contact Us

    Contact Form

  • (800) 747-9354