The larger an individual’s family and personal holdings become, the more complicated estate planning becomes. For those who have dual citizenship, international holdings or family in multiple countries, estate planning can be particularly complex.
There are a variety of tools and strategies that can be beneficial for those needing to address their legacy when they have beneficiaries or assets in another country. A careful review of personal circumstances can help people establish the best plan for optimizing what their beneficiaries receive and minimizing conflict and disputes related to international estate administration.
What are the most important considerations for those who must establish an international estate plan?
Establishing jurisdiction
Where someone lives, where they hold citizenship, where they own property and where their loved ones live can all influence what happens during estate administration. Typically, those who are citizens of the United States have to comply with domestic estate planning regulations. In fact, they have to ensure that the documents they draft comply with the laws in the state where they claim residence in particular.
The country where their loved ones live or where they hold property can also affect their estate planning strategy. Reviewing family circumstances and personal holdings is a crucial element of deciding what steps to take when developing an international estate plan.
Evaluating the risk of taxes
There are numerous taxes that can come into play in an international estate scenario. There can be income taxes for the decedent accrued in their last year of life. The estate itself could also be subject to income taxes if the estate plan includes instructions to sell assets.
In some cases, there could be estate taxes levied against multi-million dollar estates or gift tax obligations due based on transfers to family members. Transfer taxes can also apply in some cases involving international property.
There are also capital gains taxes that may affect what beneficiaries actually receive from the estate. Both the United States and the other country could have tax rules that affect the distribution of assets or the inheritance of international beneficiaries. Identifying potential sources of tax liability can help testators plan to minimize taxes through the use of preemptive transfers, trusts and other strategies.
Establishing an international estate plan is a complex undertaking. Individuals who obtain appropriate support can draft documents that protect them and maximize what their loved ones will inherit. Those with international estate plans may need to regularly review them to affirm whether circumstances have changed enough to warrant planning updates as well. The best plans reflect the laws in all applicable countries and seek to minimize losses, as well as conflict, after a testator passes.
