As the world grows more interconnected, estate planning has become all the more important to individuals and families who live increasingly global lifestyles. A good grasp of international law is no longer the preserve of multinational corporations. From expatriates to digital nomads, knowing the laws that affect your estate may save you from costly mistakes.
However, you don’t have to do it alone, and neither should you. Trust and corporate services providers can help you navigate the legal and administrative procedures. Working with professionals enables you to identify whether you need an international estate plan and set up the necessary structures to make it work.
So, is an international estate plan the right thing for you? Are you worried about what happens to your overseas investments in case of death or incapacitation? This post answers those questions and more. We’ll explore the basics of estate planning, then delve into who can benefit from an international estate plan before explaining why you need one.
What is an international estate plan?
At its most basic level, estate planning involves preparing tasks that outline what happens to your assets in the event of death or incapacitation.
Consequently, international estate planning revolves around tasks that govern how to handle your foreign and other global assets in the event of relocation, death, or incapacitation.
Some of the key objectives of international estate planning include:
- Preserving control and ownership of assets during a client’s lifetime and after their death or incapacitation.
- Maintaining your financial security and that of your spouse, children, and other beneficiaries.
- Navigating tax issues to minimize estate taxes and ensure your wealth goes to your loved ones or special causes
- Ensuring your estate’s privacy and that of your family in the event of your death.
- Minimizing the hassle for your loved ones in accessing your foreign-based assets
Who should consider international estate planning?
When you decide to invest in a foreign country, estate planning is usually the least of your concerns.
However, failure to plan your estate may result in costly consequences for your investments and wealth. The good news is; you can avoid most of these negative consequences by having an estate plan that covers all your international assets.
When an international trust and estate planner helps you craft an estate plan, you avoid the pitfalls around estate laws, jurisdictions, taxes, etc.
For whom, therefore, is an international estate plan most suitable?
Individuals with properties and investments in different countries
If you own property and investments in a foreign country, you should consider an international estate plan. Experts like trust and corporate services firm Asiaciti Trust, for example, explain that understanding the succession laws that govern the disposal of those assets might help you reduce your tax burden.
For example, a citizen may have to pay tax in a foreign country, in addition to taxes in their own countries. Properties subject to foreign laws include real estate, shares issued by foreign corporations, foreign insurance, bank deposits with foreign commercial banks, etc.
Expatriates and digital nomads
For digital nomads and expatriates, international estate planning gives you peace of mind regardless of where job or adventure takes you.
Your nationality, domicile, and residence all affect your estate plan.
Non-citizens with local beneficiaries
Many countries base their estate taxes on domicile, which requires physical presence and an intention to remain indefinitely in a country.
While you may not have to pay estate taxes at death (unless you have assets in that country), you should consider the laws governing beneficiaries in that country.
For instance, US beneficiaries can receive gifts from non-US individuals without any taxes. Still, they must report the annual gift source if it totals an aggregate amount of over $100,000.
Individuals with multinational families
Do you have a multinational family? Then you should consider an international estate plan to avoid double taxation on your estate or beneficiaries. Different jurisdictions treat estate and succession tax differently.
For instance, under common law countries, the state deducts any applicable taxes before any transfers are made to beneficiaries. In contrast, civil-based law systems tax beneficiaries before the estate’s transfer.
Non-citizens with investments in a particular jurisdiction
Non-citizens don’t have to pay a country’s estate tax unless they have a domicile in the country. However, you may be subject to estate taxes if you own any properties or investments in that country.
Former citizens who relinquished citizenship
If you relinquish citizenship, then you may likely avoid estate taxes on your foreign assets. However, the tax becomes applicable in your new-found country.
When to consider international estate planning
Falling into any one of the categories above does not automatically mean you need an international estate plan. Your circumstances could be different.
You should consider the plan when:
- You’ve accumulated significant and widely distributed wealth during your lifetime
- Transfer a significant portion of that wealth during your lifetime
- Intend to transfer a significant portion of your wealth in the event of your death
- You own, divide, or probate significant property
“Significant” means an aggregate amount above $100,000 in the United States, for example.
Why you need an estate plan
An international estate plan sometimes includes trusts and provides numerous benefits to your estate. They include:
- Reducing estate taxes – An international estate plan helps you navigate and minimize taxes in all different jurisdictions. It takes into account your investments and crafts, a global strategy that works for your estate.
- Escape probate – The probate process drags your estate through a public system, sometimes riddled with horror stories. An estate plan helps you sidestep this process and maintain your privacy and that of your loved ones.
- Protect beneficiaries – Would you want your family to travel halfway across the world to claim assets while they are still grieving? Of course not. An international estate plan eliminates the hassle for your family and protects them from exploitation and other costly decisions.
- Protect assets – Should anything happen to you, your assets become the subject of much speculation. An estate plan guarantees your assets remain protected for your spouse and children.
From minimizing taxes to reducing the hassle for your family, the benefits of an international estate plan are immense. The sooner you assess your situation and put a plan in motion, the better.