03 Nov Estate Planning With Foreign Assets
Many of our clients at Phelps LaClair have property and financial holdings in foreign countries. They may own property in a nation other than the US. Or, they may have offshore bank accounts or stocks in foreign based companies. There are special considerations in estate planning with foreign assets. As a second generation estate planning law firm serving Chandler, Mesa, Phoenix and Scottsdale, Phelps LaClair must stay current with US and foreign laws and regulations concerning foreign holdings and inheritance. Here are some of the areas where our knowledge can save you time and money in planning your estate:
When a US citizen dies in the United States, their estate may be liable to taxation if it exceeds the current limit of $11.58 million. If the same person were to die while owning property in a foreign country, their estate could be liable to taxation in the country where the property is located and in the US. There are laws regulating estate taxation that may come into play in situations like this.
The United States has treaties with various foreign countries to deal with estate taxation. The treaties allow these countries to tax real property owned by the estate in that country so long as the decedent was not living there permanently. If the country of the decedent’s permanent residence also taxes the estate, it must give tax credit to the estate equal to the foreign country’s estate tax. For instance, if a US citizen owns property in Canada, Canadian estate tax laws will apply. At the same time, the IRS will extend a US tax credit to the estate to cover the taxes levied against it by Canada. The result is that the estate will pay the higher of the two taxes, but will not be liable to double taxation.
Logic would seem to indicate that having one will for property in the US and another for property in a foreign country would be a simple solution for estate planning. When there are two wills drafted in different jurisdictions, they must be carefully written to avoid one will cancelling the other. It is best for the attorneys from each jurisdiction to work together in order to avoid revocation of a will.
Another possibility is to draft a supplemental will that covers only the property located in the foreign country. This will would include only the real property in that jurisdiction. Both the original and supplemental wills should reference each other to avoid revocation.
Finally, it is important to note that if a foreign property is acquired, but the estate plan is not updated, foreign intestacy laws will take effect. The property may end up completely out of the possession of the decedent’s family.
Estate Planning with Foreign Assets
This brief survey of estate planning with foreign assets has covered two of the most important aspects of owning property in a foreign country: taxes and wills. In a future article, we will cover foreign acceptance of US wills and the drafting of an international will. As always, Phelps LaClair has the expertise to draft a bulletproof estate plan, whether your estate is modest or abundant. If you want to know more about estate planning, call us for a free consultation with no obligation. We welcome the opportunity to sit down with you to discuss your particular needs and goals to create a unique estate plan.