The expatriate life is certainly a unique one. Spending time in different cultures for long periods of your life offers interesting opportunities for skill, language, and cultural enrichment. It also offers distinct and significant challenges. Many expats love the international life and wouldn’t dream of settling down back in their home country any time soon. This makes estate planning both a greater necessity and a greater challenge. While you may not ever return, your family and assets certainly will.
Estate planning in particular can be very confusing when you are trying to figure out how your assets will be transferred and taxed once you pass away. In many cases, it is a good idea to get some of your estate planning done before you leave the United States. You want to build out your essential documents and estate planning instruments with an experienced estate planning attorney. Even with the advantages of modern communications, its complicated to deal with local legalities and meetings while living in a foreign country. Here are things to keep in mind for your estate planning as an expatriate.
Double Taxation
One of the biggest downsides of expat estate planning is dealing with double taxation of inheritance. For people that move to countries without estate taxes hoping to avoid all taxes, the US taxes remain an issue. If you and your family remain US citizens, your estate will likely still be subject to tax. You can check if there is a double taxation treaty between the United States and the country you live in. Not every country has a treaty with the US, but most of these treaties allow you to avoid paying estate tax in the foreign country as long as you pay it in the United States.
Inheritance Laws
Always remember to review the inheritance laws in the country where you are living. In some countries, assets will be transferred to a spouse, but in other countries they go to children. Be specific with your estate planning to ensure that everything is distributed correctly after death.
Foreign Life Insurance
Acquiring life insurance in a foreign country can also be tricky. Some policies may not conform to rules in the US which can result in incomplete coverage. This may also cause death benefits to be taxed unexpectedly when you pass away. The interaction between foreign life insurance policies and US law can be grueling and complex. Getting assistance from an attorney can help you make the right decisions upfront to avoid surprises in the future.
Trusts
Although you may think of trusts as incredibly secure, the way they are distributed and taxed can be affected by the country you reside in and the country where they were established. This is one area where keeping a revocable living trust and an irrevocable trust in tandem can be valuable. Putting assets in one or the other trust “box” keeps your financial planning organized and helps you to abide by the laws of your current and former homes.
Be Prepared
If you are interested in estate planning or you are looking to make changes to your current arrangements, contact Clear Counsel Law Group. Our knowledgeable estate planning attorneys have years of experience and can make sure your assets are distributed fairly and correctly according to your wishes.