Day 39: Step #15, Considering Your Estate In The Context Of Your New Life Overseas

Considering Your Estate In The Context Of Your New Life Overseas

Dear Student,

I touched on estate planning a bit when we discussed how to structure your overseas real estate holdings. I’d like to return to this subject today to help you plan your overall estate strategy in the context of your new life overseas.

Most people do little or no estate planning. One story an attorney-friend likes to tell to illustrate the potential extreme consequence of this non-approach is about Elvis Presley.

When Elvis died in 1977, his estate was worth US$300 million. That is more than US$1 billion in today’s money.

Elvis died without an estate plan. He’d simply made a will, in which he left his assets in trust to his daughter, his grandmother, his father, and any other living relative who needed emergency assistance.

As you might guess, a fight ensued over Elvis’ assets. After all was said and done…after attorney fees, probate costs, and estate taxes, Lisa Marie ended up with about US$30 million.

Thirty-million dollars is a lot of money…but it’s 10% of the original estate.

As I said, that’s an extreme case. You don’t have to have a multi-million-dollar estate to benefit from at least some estate planning. Especially if you own assets in different countries.

In other words, as you set out now to pursue your new life overseas adventures, it becomes more important than ever to address the associated issues of your estate. I’m not an attorney or a tax planner, and I recommend you seek help from one or both on this front. Meantime, here is a quick overview of the important issues in this context.

Bottom line, you have four considerations: wills, probate, inheritance rules, and estate taxes.

Inheritance rules and wills go hand-in-hand. Without a will in each country where you hold assets, your estate will be subject to the distribution laws of that jurisdiction. As I mentioned on Day 32, in my discussion of structures for holding real estate assets in other countries, France, for example, is a particular concern. Die without a will in this country, and any asset you hold here will be distributed according to French inheritance law, which follows blood. Your wife, to whom you might intend to leave everything, could end up with nothing.

Probate is the legal process of administering an estate. Through that process, all assets of the deceased are tallied and the wishes in a will (if there is one) are executed. This is an expense and takes time. Meanwhile, your heirs don’t have access to the assets.

Not all countries impose estate taxes, but you’ll want to know if a country where you hold assets does and, if so, what the rates are. If you are American, this is particularly important, as you could have an estate tax issue in the United States for the same assets…meaning they could be estate taxed twice.

Avoiding probate in more than one country can be a simple matter of having all your assets, regardless of jurisdiction where they physically reside, held by a single corporation. Your heirs likely will have to go through probate in the country where that corporation is established (assuming the shares of the corporation are in your name); however, a single probate in a single jurisdiction is preferable to the alternative.

Furthermore, put the shares of your holding corp in the name of a trust, and you can avoid probate altogether.

A trust can also address the issues of local inheritance rules and even a will (although most attorneys recommend a will regardless of your estate plan otherwise, to cover anything that might not make it into your trust before you die), as the beneficiaries of the trust are selected by you and recorded in the trust documents.

Estate planning doesn’t have to be complicated or expensive, especially if you have only a handful of assets in one or two jurisdictions. However, no matter what you have, it is important to address this idea if you intend to leave your children (or anyone else) an inheritance. Do no planning at all can mean that much of your net worth will be eaten up by probate and attorney costs (even if all your assets are in your home country).