November 17, 2018
Often, when we think of someone having property overseas, we think of George Clooney and his Italian villa or Richard Branson and his private island. However, plenty of everyday Americans own property or assets in other countries, and it may become part of their estates when they pass on. There are special considerations to keep in mind when including foreign property and assets in one’s estate.
Consider the inheritance laws of both countries.
The laws governing your property are the laws of whichever country your property is located. For example, your condo in Costa Rica is in Costa Rica’s jurisdiction and thus will be governed by Costa Rican estate laws when you pass on. It’s a good idea to check the inheritance laws of all the foreign countries in which you own property to find out whether you can bequeath it as you wish. Some countries may not allow estates to be passed outside of bloodlines, while others may be more liberal.
Consider drafting more than one will…or selling the property.
A will drafted in the United States may only be enforceable in the United States. You can’t be certain that the country where you have the foreign property will honor what they consider a foreign will. This may especially hold true if there are provisions in your will that run counter to their own estate laws or customs. Thus, you may want to have a lawyer in the other country draft a will specifically for that property. Depending on the country, you may be able to use an International Will.
You may also consider selling the property before you die. This isn’t a decision to enter into lightly, especially if the property has sentimental value – like an ancestral home, or makes money – like a vineyard or farm. Selling the property and putting the proceeds into your estate in the United States bypasses the problem entirely. However, if you do hold onto the property and die with it…
…your estate may be taxed twice…unless you put it in a trust.
Double taxation happens when assets are taxed by both the country where the assets are located/received and again by the country where the owner is a citizen. Your estate may have to pay taxes on foreign assets twice, significantly reducing the overall value of the asset. The tax treatment may depend on whether there is an international tax treaty between the US and the foreign country.
You might be able to bypass this problem, however, by putting foreign assets into an American trust before you die so that it’s not ownership of the assets that changes when you die, but rather the beneficiaries of an American trust that happens to own those foreign assets. Whether a trust will be useful will depend on the country.
Most importantly: discuss your options with a Sacramento County estate planning lawyer.
Every country is different, and so is every estate. Our Sacramento County estate planning lawyers are experienced in handling overseas assets, and we can help you create a plan that addresses your unique needs. We can also help you understand any conflicting laws in the two countries, and advise you on what you can do to lessen any of the surprises, disappointments, or pitfalls possible when having foreign assets in your estate.