The Importance Of International Estate Planning

What happens to your assets overseas when you die?

None of us likes to think about dying… but today I’ll ask your indulgence.

My father passed away just before Christmas. He didn’t have assets overseas and he tried to make a plan for what he owned in the States. He prepared a do-it-yourself will that didn’t get recorded properly and at least one original page can’t be found.

As a result, despite his effort, his estate is going through probate intestate, meaning a lot more work for my brother, the executor.

My situation is more complicated, and I’m trying to make sure my kids have an easier time of it than my brother is having right now.

Step #1. Make Sure Your Heirs Know What They’re Working With

For the past few years, I’ve been working to consolidate assets into fewer entities. I keep the family updated on what is owned where and how at an annual meeting.

We held the most recent Family Meeting last week. This one was more formal. I prepared a PowerPoint.

“This is worse than school!” my son Jackson, a recent NYU graduate, remarked when he saw that my presentation included 54 slides.

As our kids get older and understand the complexities better, they have more questions. They asked one in particular again and again:

“Who can help us with that property?” they wondered.

“I’ve included a slide with contact details asset by asset at the end. Be patient, please,” I told them.

Our meeting went on for nearly three hours. Jackson told me I should have built in breaks, like his NYU professors did for their classes.

Keeping your heirs apprised of what assets you have and where they are located seems logical, but I know some people don’t.

Tell your kids where things are… real estate holdings and also bank accounts. A bank can make an account dormant after as little as three months of inactivity… and the state can end up with the money if the account sits dormant too long.

That’s step one… to make sure your heirs know what they’re working with.

Step #2. A Will

You may need more than one depending on where your assets are held, but you want at least one in the jurisdiction where you’re residing. Even with the will, your heirs will have to go through probate, but a will makes the process easier, faster, and cheaper.

Some jurisdictions will honor a U.S. will, which can be registered after your death. Panama is one such place. However, it can be faster and easier to have a will in each jurisdiction where you own property. Just make sure the kids know where the originals are and how to connect with the attorney who drafted each one.

Step #3. Entities

One of the overriding questions related to estate planning has to do with entities. Do you need one?

They come at a cost. The upside is that they can eliminate probate in one country when the assets in that country are held in an entity based in another country.

When I explained this plus and minus to an attendee at a conference recently, he replied to say, “Ah, the kids are on their own. They can figure things out.”

If you don’t care about making the probate process as painless as possible for your heirs, you probably don’t need to worry about housing your assets in an entity.

Many of my properties are held by a single entity. The entity doesn’t die when I do so my heirs (my kids) will be able to access the properties it holds immediately… and sell them if need be.

Probate will still be necessary in the country where the entity is located, but that process will be far simpler than having to deal with probate in multiple countries in multiple languages.

Other strategies used in the United States for avoiding probate won’t work or don’t exist in many other places in the world.

Joint Tenants With Rights of Survivorship is a good example. In a civil law country (which is more than 75% of countries around the world), if a property is held in both names of a married couple and one spouse dies, the other spouse doesn’t automatically inherit the deceased spouse’s share.

It has to go through probate… and, unless a local will is in place, specific inheritance rules in the country where the asset is located likely will apply. Typically, that means some percentage of the asset will go to the current spouse and some percentage to the children of the deceased spouse.

The next level of estate planning involves a trust or foundation, which eliminates any question about who gets what. The problem with a trust is that it’s a common law entity. Many civil law countries won’t recognize it. That’s where foundations come in. They are the civil law equivalent of a trust.

The more assets you hold overseas, the more complicated your estate becomes. I recommend considering the inheritance and legacy aspects of any asset when you acquire it… and then regrouping on your portfolio overall at the start of each New Year.

Thus my Family Meeting with the kids last week.

I have to give it to them. They stuck it out for all 54 slides.

Lief Simon
Editor, Offshore Living Letter