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Can I Include Overseas Properties in My Estate Tax Plan?

As society has grown more interconnected and globalized, many Americans have chosen to purchase assets or property in different countries. When it comes to estate planning, any potential purchasers understandably want to ensure that all of their property and assets, regardless of location, will be distributed according to their personal wishes upon their death.

In general, estate planning must be carefully executed because of the practical, legal, and tax implications of the process. When it comes to including foreign property in the estate, careful estate planning is even more important because any foreign property will also be subject to the foreign country’s laws and customs. A lack of estate planning can result in the heirs or beneficiaries losing the property entirely or being subjected to double-taxation, both from the United States and the foreign country or even worse, multiple sequential or concurrent probate court proceedings.

First, and most importantly, anyone with foreign property should ensure that their will is valid in that foreign country. Wills are typically subjected to rigorous scrutiny and require exacting legal standards must be followed. Consequently, just because a will follows the legal requirements in the United States does necessarily mean it will be valid in a foreign country. For example, the number of witnesses required at the will’s signing and the acceptability of handwritten wills are commonly different among countries, and even among different states. Another common problem occurs if the will is written exclusively in the English language, a translation could change the meaning of the will and thus the succession of the property. In addition to these issues concerning will’s validity and interpretation, the laws of a foreign country may also determine who may receive the property. For example, some foreign countries only allow property to pass to a blood-related heir.

The appropriate succession of ownership is not the only concern for taxpayers with foreign property. Taxation is also a large issue when it comes to estate planning with foreign property or foreign assets in general. It is possible that when the property transfers ownership the country where the property is located that both the United States and the foreign country will tax the new owners. In the United States, foreign property is still subject to estate taxes. In many foreign countries, transfer of ownership is also taxed. To make matters even more complicated, some countries have different tax rates depending on whether heir is a close relative, a distant relative, or not a relative at all.

Because different countries follow different laws and customs, there is no “one exact way” to ensure that property in a different country is included in your estate plan. Furthermore, considerations such as taxation and the type of ownership can also determine the best method of including the property in your estate. To make sure all your wishes will be carried out, it is best to contact an American attorney and an attorney in the country where the property is located. Together, both attorneys should be able to understand the intersections of the two countries’ laws and their impact on your estate plan.

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