POV: You inherit a charming villa in Tuscany from a distant relative… only to discover it’s tied up in years of legal battles and exorbitant foreign taxes. This dream inheritance quickly becomes a nightmare…Don’t let this happen to your loved ones! If you own international assets, you might wonder how giving your stuff away works when you die. How do your beneficiaries get your stuff? Is it taxed? Can you avoid taxes? How long does it take? All great questions! Whether you just have a simple home or bank account located overseas or you have an entire portfolio, businesses, and a whole lot more, you can address international assets in your will and ensure your stuff is taken care of when you die. Let’s dive into everything you need to know.
What do we mean by international assets?
First, let’s make sure we’re all on the same page. When we’re talking about international assets, we’re saying assets that are located in a country outside of the U.S. For example, let’s say John has a large real estate portfolio located within the U.S. He also has a few bank accounts and retirement funds. Over in Ireland, he owns a cottage and a small Irish business he runs from his home in Chicago. The international assets in this situation would be his Irish cottage and Irish business.
The issues with international assets
The dilemma comes in when John (the American) tries to devise his Irish (international) assets to American beneficiaries–how do they go about receiving the property, potential conflicting wills, how does probate work, what are the tax implications, etc. Here’s what to consider when dealing with estate planning and international assets:
- Differing inheritance laws: Some countries have “forced heirship” rules, requiring a certain portion of the estate to go to specific family members, regardless of the will’s contents.
- Tax implications: Estate, inheritance, and capital gains taxes can apply in both the U.S. and the country where the assets are located, potentially leading to double taxation.
- Probate processes: Dealing with multiple probate processes in different countries can be time-consuming and expensive.
- Locating the assets: If a complete and accurate record of all international assets isn’t available, it can be difficult for beneficiaries to identify and claim them.
- Currency exchange: Fluctuations in exchange rates can affect the value of inherited assets.
- Asset transfer: Transferring assets across borders can involve complex legal and administrative procedures.
As you can see, a lot of the issues depend on the laws of the country in which the assets are located. The tax implications in Ireland might not be the same in Australia, and so on and so forth.
Steps to address international assets in your will
So what can you do about it? How do you make sure your beneficiaries aren’t riddled with taxes and consuming processes, and actually get their hands on your assets as you hoped? Let’s discuss the steps to addressing international assets in your will:
Step 1: Take a detailed inventory. In order to avoid at least one of the headaches of international assets (locating the property), make sure to create a comprehensive list of all assets, including locations, account numbers, and estimated values, so that your beneficiaries can properly claim your stuff.
Step 2: Get a local lawyer. You will likely need to consult with legal help in both countries in order to understand what the laws are in each, and how the two laws will intersect. They can advise you on tax treaties, probate processes, and other requirements to ensure your wishes are met.
Step 3: Consider duplicate wills in both countries. Depending on the laws in each country, you may want to consider getting the will done in both countries and multiple languages (if applicable). For example, if there are “forced inheritance” laws in one country, but a will overrides those laws, you’ll want to consider getting a valid and enforceable will in that country to override that law. One will should dispose of the U.S. assets, and the other will should dispose of the international assets.
Step 4: Make sure the will is translated. Whether or not you’re going the duplicate will route, make sure you get it translated to the language of the country your assets are located in. If your beneficiaries are across borders, you should get both wills in both languages, just in case.
Step 4: Consider a trust to avoid taxes and probate: If things are looking grim in terms of taxes, probate, etc., in both countries, you may want to put your American assets in trust and devise your property that way. Through a trust, you can avoid the probate process (at least for the U.S.), cutting down on the time spent in probate. You may also be able to put foreign assets into a foreign trust, depending on the country’s laws and how trusts work.
Considerations for different types of international assets
When it comes to international assets, different asset types present unique challenges. Inheriting real estate versus a lump of cash is a very different process.
For example, foreign real estate often involves navigating local property laws, inheritance regulations, and potential legal restrictions on who can own property in their country. For general bank accounts or investment accounts held overseas, these may be subject to specific regulations and tax implications in their respective countries.
For those who own businesses in other countries, inheriting shares can involve navigating complex corporate governance structures, foreign tax laws, and potential restrictions on foreign ownership. Seeking out an attorney familiar with property inheritance in any or all of these areas would be ideal.
The bottom line on addressing international assets in your will
The moral of the story is that you should obtain a lawyer in the country where your international assets are located. Otherwise, your beneficiaries could potentially never see your assets, have extreme difficulty in obtaining them, or get double-taxed (and maybe that’s unavoidable, but you can look into some workarounds). One way to avoid any headaches may be to execute a U.S. will for your U.S. assets and an international will for your international assets. You can also consider a trust to help cut down on taxes and probate time. Whether your treasures are here or abroad, take the time to explore your options and protect your legacy!
Sara is a bilingual Spanish-speaking attorney and legal advisor from Orange County, CA. Sara is the co-founder of Ovando Bowen LLP, along with her husband Chumahan Bowen, Esq. As a legal advisor, Sara helps her clients navigate the complexities of both business and personal affairs. Sara has been assisting individuals and families since 2009 when she worked at the Long Beach Courthouse, Self-Help Center. Book a Q&A or Full Representation with Sara here
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