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If you own property outside the United States, you likely know how important it is to carefully manage your records. But even the most careful planners can overlook some of the rare angles that should be considered with an international estate. Below are five unique aspects of international estate planning and the key to ensuring that your properties and other assets are distributed according to your wishes – no matter where they are located.

1) The Need for Full Disclosure

The path to a comprehensive international estate plan begins with full disclosure of all of your assets to your estate planner. While many people are vigilant about remembering to include property and other assets in the USA, some individuals fail to disclose offshore properties or accounts because they are located overseas. As you disclose your list of foreign assets, be sure to include any of the following that are located in another country:

  • Foreign properties, including homes, condominiums, and rental properties
  • Foreign bank accounts and their contents
  • Automobiles and vehicles
  • Safety deposit boxes and their contents
  • Precious gems and other jewelry
  • Antiques and collectibles

2) Non-citizen Spouses

“It is not uncommon for a U.S. citizen to have a non-U.S. citizen spouse. However, U.S. tax law treats non-U.S. citizen spouses (even if they have a green card) less favorably, as non-citizen spouse are not eligible for the “marital deduction”. This means that the tax liability that could otherwise be deferred is brought forward if the U.S. citizen spouse dies first.” – Renuka Somers, Asena Advisors

Married couples comprised of at least one non-U.S.-citizen must use extra care in order to prevent their estates from being subject to adverse tax consequences. In addition to a greater likelihood for adverse estate tax consequences, the unlimited marital deduction is generally not allowed if your surviving spouse is not a U.S. citizen.

3) The Power of Irrevocable Trusts

You may wonder why anyone would want to establish a trust they cannot revoke. The truth is that irrevocable trusts are more common than you might think. Irrevocable trusts are an especially good option for non-U.S. citizens who are planning to leave assets to children or another U.S. citizen:

“If you were to leave significant assets directly to a child or another US citizen or resident without the use of a trust vehicle, these assets would become part of the recipient’s US taxable estate. Even though the assets were held outside the US, they may become subject to US federal estate tax.” – Gerald F. Joyce, National Head of Trusts & Estates, Fiduciary Trust International

4) Loans as a Substitution for Gifts

A loan is something that would likely never enter the mind of the average American going through the estate planning process. But an interest-free loan is a viable alternative to a gift to a spouse who is a non-U.S. citizen. As long as the loan amount is smaller than the marital annual exclusion, gift tax will not apply and the funds can be spent or invested for financial growth.

5) The Potential for Double Taxation

“It is possible that when foreign property is transferred, U.S. estate tax will apply, but so will the tax of the foreign country. When a citizen of the United States dies and owns property in a foreign country, the property in the foreign country will be subject to U.S. estate tax if the estate is subject to taxation at all.” – American Bar Association

Double taxation is something that some international property owners fail to think about when drafting an estate plan. But depending on the country where your properties are located, those properties could be subject to both U.S. estate tax and tax in the country where they are located.

Keeping up with changing estate tax laws can be a full-time job, especially if you own properties in multiple countries. The best way to make sure that you have planned for all applicable estate taxes is to ask a skilled international estate planning lawyer.

What is the key to ensuring careful international estate planning?

As outlined above, international estate planning is full of complexities. Even a minor oversight can leave your loved ones facing lengthy delays and expenses after you pass away. Fortunately, these potential pitfalls can be avoided through your careful planning today.

The key to ensuring that your estate plan is comprehensive is to reach out to a lawyer with expertise in international estate planning. With the guidance of an experienced attorney, you can experience peace of mind knowing that your estate will be handled efficiently and according to your wishes.

We invite you to contact us today to discover why residents across Pennsylvania and New Jersey turn to us for assistance mapping out a thorough estate plan for their domestic and international properties. We look forward to helping you draft a plan that reflects your wishes and includes all of your assets – regardless of their location.