Own a villa in Tuscany? A hacienda in Mexico? An apartment in Paris? If you own property or keep assets in a foreign country, your estate planning attorney needs to know prior to executing any estate planning documents. An attorney in the foreign country will need to be a part of the estate planning team to advise on local laws and tax considerations.
There are two general types of clients possessing foreign assets. First, a US citizen may own property in other countries or someone living in the US as a non-citizen may still own property in the former foreign residence. The manner in which the estate planning process will be approached depends on a variety of factors:
-the laws of the country in which the foreign property is located;
-the citizenship of the grantor, his or her spouse as well as the citizenship of all heirs; and
-the value of the estate.
It may be best for a Maryland resident who owns foreign property to execute two wills. One will states how all US situated property will be devised while the other will dispose of the foreign property. Both wills should adhere to the requirements of Maryland’s version of the Uniform International Wills Act. Those requirements include executing a written will of one individual person, witnessed by two other persons and accompanied by an attesting certificate from the estate planning attorney that the will was drafted in accordance with the act.
It is critical that the Maryland estate planning attorney consults with the foreign counsel to coordinate the drafting of the wills. You do not want one will to cancel out the other. If that occurs, one or both estates may be distributed according to local intestacy laws rather than as intended and set forth in the will(s). Probate is easier with two wills, especially if the foreign will needs to be in a foreign language. A will should be clearly understood by local legal authorities.
A will may not be your best option though if your spouse and other heirs are not US citizens. Depending on citizenship issues, it may be better to approach estate planning with the use of various trusts. One of the most important considerations in foreign property estate planning is how to structure ownership of the assets – both foreign and domestic.
To qualify for the marital deduction in the US (which allows a spouse to leave property to the other spouse without incurring estate taxes), the beneficiary spouse must be a US citizen unless the property is included in a Qualified Domestic Trust (QDOT). QDOT can be very complex and should be drafted by experienced estate planning attorneys. Another strategy available is to create an irrevocable life insurance trust that allows assets to transfer to US citizens from non-citizens without incurring gift tax consequences. Some other non-citizen transfers may occur through the use of an LLC.
Estate planning attorneys can offer advice on the best strategy to fit your situation and accomplish your goals. The strategy implemented will also need to take into consideration tax issues for both the US and the foreign country. The US has estate tax treaties with several foreign countries. These countries may tax the estates of foreign property owners and the US will give a credit for the foreign tax paid.
To set up a consultation with an estate planning attorney knowledgeable in the legal and tax hurdles involved with the ownership of foreign assets, contact Stouffer Legal in the Greater Baltimore area. You can schedule an appointment by calling us at (443) 470-3599, emailing us at firstname.lastname@example.org, or register for an upcoming free webinar using the link below: