How Does Owning Property in Multiple Countries Affect Your Estate Planning?

What Happens to International Property in a U.S. Estate Plan?

Not surprisingly, many high-net-worth families have property in other countries that they want to account for when they plan their estates. This situation is not to be undertaken lightly because it involves laws outside of California and the U.S. Any laws pertaining to estate planning, tax laws, and property transfer in the country where the property is located must be identified and followed, or the estate plan (or that part of it) may be invalid.

Accounting for California property can be complicated enough when estate planning, not to mention property in other U.S. states. Adding properties elsewhere makes it even more so. What comes into play is not just the ownership and tax implications but other aspects, such as the nationality of the owner (whether they are U.S. citizens, have dual citizenship with another country, or live in California but are foreign nationals).

Unfortunately, sometimes people think that if the property is in another country, they don’t have to worry about it when estate planning. That’s far from the trust, as many have learned the hard way. The U.S. takes estate planning, tax implications, and inheritances seriously, and so do many other locales.

Does Owning Property in Multiple Countries Cause a Need for Multiple Wills?

That depends on many of the factors described above, but yes, it’s possible that more than one will could be needed to protect all international property fully. Depending on the other countries involved, one will might be enough, but it’s highly advisable to work with an experienced estate planning attorney to determine what’s the right approach for your estate.

If multiple wills appear to be the best approach, having your U.S. attorney coordinate with counsel from other countries might be valuable to ensure all requirements and laws are followed. There’s also the possibility of having wills drawn up in the other countries’ primary languages, which could help ease the distribution of assets and probate-type procedures.

However, it’s vital to understand that when multiple wills are involved, it’s crucial that they be in sync with each other and follow the rules of each country, or some of them could be found invalid. In some cases, the foreign property can be dealt with as a supplemental will (such as a codicil to the first will). In other cases, carefully wording each will to clearly refer to other wills can avoid problems with wills being declared invalid.

What Is Ancillary Probate?

Ancillary probate is the term for the proceedings that may be needed when probate happens across more than one jurisdiction, such as owning property in states or countries other than where the estate owner lived. Technically, the property in those other locations is under the jurisdiction of that location, not of the U.S. home.

This can cause increased time and expenses for the beneficiaries, as multiple attorneys may need to be hired, a will’s executor will have more work to do (and if they’re being paid, they’ll earn more), and the different courts involved may not agree with each other on how the property should be distributed to the inheritors.

Is It Possible to Transfer Foreign Properties into a U.S. Trust?

It’s possible, but considerable research and time are required to verify whether every country involved recognizes trusts. Many countries don’t. Suppose the foreign property in one of those countries is placed into a U.S. trust. In that case, it can cause problems, including higher taxes or difficulties, with the ownership of the foreign property transferred to the beneficiary named in the trust.

What About Using a Foreign Trust?

Some countries offer foreign trusts. Those trusts aren’t subject to U.S. jurisdiction. However, they do offer the opportunity to use a trust, which is often a less time-consuming and costly way to transfer property to beneficiaries. They can bypass probate court and possibly offer some tax savings. They also offer better protection against creditors and other claimants to the estate. They may also offer protection from divorce claims, civil actions, or forced or false inheritance claims. That isn’t necessarily because foreign laws protect the trust from claims but because the cost and difficulty of pursuing legal measures outside the U.S. can be prohibitive. It’s also good to know that some countries are willing to enforce criminal cases and convictions from the U.S. if they involve a trust.

There are downsides and concerns to foreign trusts as well. U.S. trusts are protected by U.S. laws that don’t apply in other countries, so there may be little legal recourse if something happens to the foreign trust. Government stability is another significant factor. Anytime a country undergoes a change in government, relevant laws may change, and not always for the better.

Foreign trusts may also be subject to taxes, including from the IRS. These are all situations that should be discussed with your estate planning attorney.

What Should I Do if I Own Property in Multiple Countries and Need to Begin Estate Planning?

Call Cava & Faulkner at 916-685-1225 for a free consultation. International properties can add a layer of complexity to an already complex estate. Our team of experienced, knowledgeable estate planning attorneys can go through your property holdings to identify what countries are involved and what laws might be applicable. These are situations that require the utmost attention to detail, and our firm will endeavor to ensure every detail is accounted for.