Planning your estate is a meticulous process. You’re managing your assets, properties, and deciding who should inherit your livelihood.
Creating a will or a trust to protect your assets is an important part of planning your estate.
However, it is also important to ensure that you are securing property that you own in other countries. Remember: United States laws don’t always translate into foreign legislation.
Therefore, unless you make specific plans, it is likely you aren’t adequately covering your assets in foreign countries.
Here are a few things you need to keep in mind as you plan your estate to include foreign property.
Foreign Property in Your Will
Drafting Your Will
To cover your domestic estate, you need a general U.S. will. This will protects your domestic estate and assets. However, the terms of this will won’t translate into foreign property protection.
When applicable, it is beneficial to establish a separate will in each country in which you hold property. Doing this is tricky, because you must be careful you aren’t conflicting with or revoking the protections of your general or other existing wills. A conflict of wills subjects the property to the estate laws and intestacy of the country in which it resides.
The wisest method of avoiding a conflict of wills is to hire an attorney in each region of property ownership. The attorneys you hire can work together in carefully drafting your will so as to protect you from neglecting your foreign estate or revoking the establishments of multiple wills.
The addition of a carefully drafted foreign codicil can protect your foreign assets without redrafting your entire will document. The codicil amends your existing will without rendering it void.
The Virginia Code has an inheritance process for an estate that is left without a will. Intestate law dictates that an estate passes to the surviving spouse, followed by the children, parents, or siblings, in order of succession.
In foreign countries, intestate laws vary. Each country creates a set of laws that govern estates within their power, and often, a U.S. will does not consider the different international legislations.
In some cases, the foreign government will appoint the remaining estate property to the surviving spouse regardless of the beneficiaries named in the U.S. drafted will. Others will pass the property along to children or grandchildren. By not properly securing your foreign estate, you risk forfeiting your property from your estate, or passing it on to assumed beneficiaries.
Securing your estate against foreign intestacy laws is time consuming and, at times, a costly effort. However, it is worth the effort of preserving your estate.
U.S. Wills in Foreign Jurisdictions
As stated, foreign entities do not always recognize wills drafted to suit U.S. estate laws. Your wishes are subject to provisional and tentative acceptance.
Drafting your will requires a tedious and in-depth knowledge of the laws governing your property. U.S. estate law varies from foreign law, just as each country’s laws will vary from each other.
There is little consistency in international law. Therefore, it is important to hire a lawyer from each jurisdiction of property ownership. Hiring multiple lawyers helps you to understand each set of laws and adhere to all international regulations.
In accordance with the American Bar Association’s requirements, an international will:
- Can only cover what you individually own (physical assets, shares of property, etc.)
- Must be physical, and in any language (handwritten or typed permitted)
- Requires 2 witnesses, signatures of the witnesses, and your attorney present (notaries are not required as witnesses)
- Must contain your signature upon document completion
- Must have each page numbered and signed by you
Your capacity at the time of drafting must be noted in the will, or else it is considered invalid.
Additionally, you must include a signed certificate that ensures you are following all of the property requirements, procedures in drafting, and officially outlined execution procedures. Your certificate must be authorized for international recognition. Satisfaction of all three requirements is mandatory.
Foreign Property and Taxation
Although you are able to cover your foreign property in your will, you may be considering your ability to transfer your foreign property ownership. Here’s how it works.
International Estate Taxes
Transferring your property comes with the estate taxes of the U.S. and the location of your property. That’s right: an estate in a foreign country is still subject to the U.S. estate tax if you are a permanent resident of the country.
U.S. taxation of international property is designed so that foreign entities are able to collect estate taxes simultaneously. However, as a U.S. resident receiving U.S. issued taxes on your foreign estate, you have “credit”. In other words, the U.S. tax fees must cover the foreign taxes being applied to your foreign estate.
Taxes on your personal property, such as cars and furniture in a foreign country, are only valid from your country of permanent residence.
Gift Taxes on Foreign Estates
It is unwise for you to transfer your foreign property out of your estate. You avoid the property listed as an asset of your estate, but you forfeit all rights to the property while you are alive.
Your gifted estate is also subject to international gift taxes. Although you are able to transfer your property to a spouse, children, or other family member, you must consider the consequences.
Countries categorized as “civil law” charge higher gift taxes on property that you internationally gift. Transferring your property in Scotland to a relative in Virginia during your lifetime carries a hefty price tag.
Foreign property is an important part of your estate plan. Knowing who is inheriting your estate and ensuring your wishes are protected is a tricky task. Schedule a consultation with our estate planning attorney to secure your foreign property.