International Estate Planning

As you can imagine, estate planning takes on quite a different tone when international components are involved. Whether you're an expat or just someone who happens to have overseas investments and interests, there's never been a better time than now to get everything in order. Cities like Los Angeles have experienced an influx of people who need this kind of customized, tailored approach when it comes to their estates.

When you're doing your international estate planning, you'll want to keep in mind that there are multiple factors at play. Consulting with a seasoned professional will give you peace of mind, as international estate planning can become quite confusing at times. For instance, one of the hottest topics tends to be the enormous reach of the United States government when it comes to taxing the income of American citizens who live abroad. However, there are even more complex issues to consider.

Estate taxes can skyrocket when an American spouse dies and leaves behind a husband or wife who is not a U.S. citizen. Transfers, deductions and marital deductions can become much more entangled when a family is comprised of multinational components. Other considerations may include the inheritance laws of the country in which the family makes its primary residence, as well as a host of other issues such as gift tax treaties. Whether you're living in Los Angeles or London right now, you'll want to make sure that your will and other important financial structures have been examined and designed with the specific country you inhabit in mind.

It is never too early to start researching and planning every aspect of your international estate, especially if you plan on moving to a different country sometime in the near future. An experienced estate law expert will be able to walk you through the intricacies of everything from transfer taxes to powers of attorney, and the sooner you begin to explore your options, the more prepared you will be.

It is absolutely crucial to work with an experienced team that understands the complexities of current tax laws—and anticipates the ways in which they may change. For example, Personal Investment Companies (PICs) were once considered an excellent option for those who had accumulated great wealth, but current laws make them so problematic that they are almost obsolete for U.S. citizens. However, a family member who is a citizen of another country may be able to make use of PICs and experience great benefits from them.

Using gifting strategies such as Section 529 college plans is an excellent way to preserve wealth while minimizing tax liabilities. However, international law can complicate gift giving, imposing taxes that can negate all of the financial reasons for structuring assets in this manner. Of course, each country maintains different policies regarding 529 accounts, so it will be important for grandparents—and others who want to allow funds to skip a generation—to become aware of the local laws in their jurisdiction.

While most American states will defer to the courts when help is needed interpreting legal documents, countries that function through civil law systems tend to be much more closed. Therefore, those who are living in countries that operate under civil law—such as many South American nations and countries in Europe and Africa—should alter their estate planning accordingly.

With more stringent rules and forced heirship, these laws do not offer much flexibility when it comes to who will be inheriting what. For many individuals who prefer to plan out their wills to their exact specifications, it will be very important to discover what a country's legal foundation is. Ideally, this would be done before moving outside of the United States or any other country that functions on a common law platform.

Situs, which refers to the location of funds and property, is another concept that will often come into play when you're structuring an international estate. From life insurance to intangible personal property, situs is a crucial consideration. An estate planning professional will be able to walk you through this often complicated matter, helping you to determine which of your assets maintain U.S. and non-U.S. situs. For instance, you may be surprised to find out that stocks issued by an American company are U.S. situs—even if you are living in Europe. Bonds and property, of course, will also be affected by situs. This is one of the most complex areas of international estate planning, as situs can impact foreign transfer tax credits and many other aspects of an estate. Tiebreaker rules may also apply, and in this case, you will need to be made aware of estate tax treaties.

Trusts are yet another potentially complicated component of international estate planning. For example, qualified domestic trusts can protect the interests of individuals with spouses who are not citizens of the United States. However, a lifetime gifting plan may be a better idea, depending upon a nation's tax laws. Also, people must realize that their U.S. trust's structure may not even be recognized by the country to which they are moving. This is why it is absolutely crucial to have all trusts carefully analyzed before any permanent moves take place.

With so many details involving treaties, trusts and properties, it is of the utmost importance that individuals work with legal professionals to ensure that their assets are protected whenever an estate is affected by international law. One seemingly small mistake or oversight could lead to major problems down the line. When your international estate is at stake, there is no such thing as too much planning.