In an interconnected world where professional and personal opportunities more and more often result in people having family, property, and interests all over the globe, the question of how to protect the assets they’ve built becomes much more complex. Living an international lifestyle means that estate planning may not be governed solely by the laws of one jurisdiction. The requirements of different countries can introduce unanticipated complications affecting potential tax liability and possible conflicts between different legal systems.
To ensure that an individual’s assets around the world are managed and passed on in accordance with their wishes as efficiently and with the minimum tax liability possible, it’s necessary to understand the scope of the challenges involved. Effective cross-border estate planning that takes a proactive approach can help avert problems and find creative solutions for accomplishing estate planning goals.
What Are the Primary Issues in International Estate Planning?
Estate planning can be a tricky issue for any family, from overcoming a reluctance about frankly discussing end-of-life planning and preferences for distributing property among heirs to finding the correct legal strategy to accomplish such a transfer as easily as possible. To these cross-border estate planning also adds the issues that arise when a plan must also consider the effect of different legal systems, tax regimes, and cultural expectations. Challenges can include:
| Challenges With Estate Planning For Foreign Nationals In The USA | Description |
|---|---|
| Cultural Differences | Cultural norms around family inheritance and who exercises decision-making authority can vary considerably, with different legal presumptions as a result. For example, some jurisdictions have forced heirship laws, which mandate that a certain portion of a decedent’s estate must be left to their next-of-kin. |
| Differing Legal Systems | One country’s laws governing estate distribution, inheritance tax, and guardianship can diverge considerably from another’s—and those laws may conflict. |
| Tax Implications | If an estate spans multiple jurisdictions, it’s likely to be subject to taxation in multiple countries as well. Minimizing tax liabilities under these conditions will require careful tax planning. |
Strategies Essential for Effective International Estate Planning
| Steps | Why | Things to Know |
|---|---|---|
| Conduct a comprehensive asset inventory | To ensure that all property is is accounted for | – Inventory should include:
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| Gain an understanding of local laws | To understand the different estate, inheritance, and tax laws that apply in each jurisdiction where assets are held | – Consult legal experts specialized in those jurisdictions’ laws – Legal tools used will vary, but common tactics include:
|
| Tax Planning | To minimize an estate’s global tax liability | – Consult tax professionals -Tactics that help preserve wealth for beneficiaries
|
| Regular Review and Revision | To make sure it is still set up to accomplish its intended goals. | – Laws, personal circumstances, asset values, and portfolio holdings all change often |
Explanation for each recommendation above:
Given the inherent complexities involved in international estate planning, those who tackle the question as soon as possible, with the assistance of knowledgeable legal and financial professionals, are in a better position to achieve their desired outcome. The first step should be conducting a comprehensive asset inventory to ensure that all property is accounted for. This detailed inventory should include the type, location, and values of every global asset, including bank accounts, investments, real estate, and personal property.
With this information in hand, the next step is gaining an understanding of local laws. A clear understanding of the different estate, inheritance, and tax laws that apply in each jurisdiction where assets are held is required to develop a comprehensive estate planning strategy. Consulting legal experts specialized in those jurisdictions’ laws is prudent.
The legal tools that may be used will vary depending on the goals of each estate plan and the limitations imposed by each jurisdiction’s statutes. Common tactics include using multiple wills and establishing trusts. Using multiple wills, each of which governs the assets held in a specific jurisdiction, can simplify the probate process, ensure compliance with local laws, and reduce administrative costs. However, the terms of these wills must be carefully coordinated to safeguard against having one will unintentionally revoke another. International trusts can help avoid probate, protect assets, and minimize tax liability. To do so, however, trusts must be properly designed so they will be recognized and effective in their applicable jurisdictions.
Because tax planning is a key goal of cross-border estate planning, strategies to minimize an estate’s global tax liability should be developed with the assistance of tax professionals. Structuring assets to take advantage of tax treaties between two nations, using life insurance policies to cover anticipated tax liabilities, and similar tactics can help preserve wealth for beneficiaries if set up in advance.
Finally, laws, personal circumstances, asset values, and portfolio holdings can all (and often do) change. As with any estate plan, a cross-border estate plan should be subject to regular review and revision (if necessary) to make sure it is still set up to accomplish its intended goals.
Cross-Border Estate Planning Experts
Estate and tax laws are fiendishly complex, with provisions that may vary depending on if an individual is a citizen or non-citizen in each jurisdiction. Bridge Law, LLP, specializes in cross-border estate planning that considers your individual circumstances holistically to devise effective overall strategies. To learn more about how we can help you accomplish your estate planning goals, contact us here to schedule a consultation today.