When individuals reside in one country and own assets in another, the laws of different countries can create unintended consequences if you pass away. This includes assets such as cash, real estate, stocks, bonds, and most other types of property.
Occasionally, some countries recognize Wills drafted in another jurisdiction. For example, a U.S. Will may be valid in a foreign country if it satisfies all formalities under the laws of the foreign jurisdiction. However, some countries will not recognize a Will drafted in another country under any circumstance, or only in a special situation.
Consider that in the U.S. an individual is typically free to dispose of their estate as they desire, subject to spousal rights. By comparison, France makes almost no provision in its succession laws for a surviving spouse. So, a U.S. individual passing away (with Will or no Will) and a solely owned property in France may leave the surviving spouse under French law with no claim to the foreign asset.
When an individual or family is “international” - with assets located in different venues – making provisions to dispose of property is essential.
There are different types of indispensable planning tools to protect you and your family assets. Estate planning for individuals living abroad - or with assets located in more than one country – can become exceedingly complex.
Estate or death taxes, and related generation skipping transfer taxes, are very convoluted areas of tax law, particularly in the U.S. A ‘quick-fix’ expatriate Will, just won’t solve the numerous tax or property issues involved in the international scenario.
And don’t be fooled into believing you have an enforceable Will simply because your local Consulate or Embassy in the new venue has notarized a Will or other legal document. Notarization simply ensures that the signatures on the document are authentic. That is all it does. The person notarizing the document is not giving legal advice, nor are they assuring that the document will serve the purpose for which it was intended. The notary simply affixes his official stamp and signature along with official registration number on the document while witnessing the signatures.
International Planning Options
For estate planning purposes, there are generally three different ways to address owning assets in multiple venues. This includes 1) multiple Wills, 2) an International Will, or, best of all, 3) an International Trust combined with one of the first two options.
With the first option, individual estate planning with different Wills in different countries acting simultaneously upon death is one solution. Each Will from each jurisdiction must be carefully drafted so it is limited only to property within that country and so it does not invalidate other, pre-existing Wills in other countries. If not co-ordinated correctly, some very unusual or unintended consequences could result.
Multiple Wills can be the most complex and difficult documents to write, especially where assets or beneficiaries are located across several jurisdictions. What makes them more challenging are the laws of different assets located in multiple venues. The issues become even more complicated when living in a country which might apply Sharia law to assets located in the country.
A second option is an International Will. Most people – including most lawyers – have never heard of an International Will. But in many situations this option could be far better than multiple Wills in multiple jurisdictions, that may or may not be properly coordinated to work together.
In 1973 in Washington, D.C., the International Institute for the Unification of Private Law (UNIDROIT) held a convention to provide for a uniform international law on the form and standard for an International Will. The purpose was to create an International Will that would make estate planning with international ramifications more straightforward, and without revoking or interfering with local sovereignties.
An International Will is relatively straight forward.
For an International Will to be effective, there is a list of requirements that must be met. For example, the Will must be for only one person (no joint Wills), and the Will must be in writing, but may be in any language. In addition, the Will must be witnessed and signed by two witnesses and an attorney (a notary is not sufficient), and all signatures must be at the end of the Will. If the Will is more than one page, each page must be numbered and must be signed on each page. And if the testator is unable to sign, the reason must be clearly noted in the Will.
In addition, a certificate must be attached to the end of the International Will, signed by an attorney, attesting that the requirements and procedures for drafting and execution have been satisfied. There are other formatting and signature concerns, but as to the actual content of the Will, the above generally satisfies the International Will requirements.
What is known as the Uniform International Will Act was enacted in Washington DC under the UNIDROIT convention. The greatest benefit to an International Will is knowing that when it is properly drafted it is valid in any jurisdiction that has signed or enacted the Uniform International Wills Act. To learn more about UNIDROIT, go here.
What countries have signed up for the International Will?
As of 21 January 2015, Australia, Belgium, Bosnia-Herzegovina, Canada, Cyprus, Ecuador, France, Iran, Italy, Laos, Libya, Niger, Portugal, Russia, Sierra Leone, Slovenia, United Kingdom, and the USA. And because in the USA estate succession laws are the domain of the local states, individual states also needed to enact the Washington Convention, of which at last count, 23 states and the District of Columbia have adopted the International Will. Go here for the current status of the country you are interested in.
More information about the Convention is available on the UNIDROIT website.
The third – and generally preferred - planning option is using an International Trust in conjunction with either of the first two options. This is generally considered a superior planning choice. Why?
An International Trust is basically a trust designed to apply the choice of laws in a jurisdiction most favorable to you. An International Trust is first about organizing your assets in advance of an event – management of risks, international investment diversification, threats of litigation, pre-migration planning, retirement, death, to name but a few - to protect your hard earned assets as you see fit.
For estate planning purposes, all assets are placed in the trust planning structure. The trust generally owns LLCs you create, and the LLCs own title to the assets. You, as the LLC manager, can control the assets during your lifetime when neither you nor the assets are under threat. And as the trust protector, you also have powers over the trustees and administration of the trust. Upon your death, the distribution of assets is as you directed when you first created the trust.
If all assets are owned under the International Trust, then technically, you could do away without any Will altogether. However, since most individuals retain some assets directly in their name for various purposes, those assets should pass by a Will into the International Trust. Technically, the Will is a “pour over” Will, since the assets held in your name pour over into the trust and are then distributed as you directed.
Whether using multiple Wills in multiple venues, or one International Will, in either case they can be set up to pour over assets into the International Trust. It is then the International Trust that directs who, when and where the assets are distributed. The laws of local venues would not generally apply or interfere with your planning.
To Learn More About International Trusts
Our web site – DavidTanzer.com – offers complimentary past articles describing International Trusts if you wish to learn more.
This article explains International Trust features. Go here for the A, B, Cs of International Trusts. To demystify International Trusts, visit this article. Here is a good primer on controlling assets through an International Trust, and here. This article is about managing assets in an International Trust. And the article here points out more information about what an International Trust can do for you.
The more you understand international planning options, the less foreign they become.
Offshore is a great risk management tool (go here to learn why) and is not only perfectly legal, but a great tool for smart, forward thinking individuals.
And without doubt, working with a planner that understands and lives in the international world is essential. A lawyer that rarely leaves his or her backyard and relies upon forms and manuals to implement planning, is like saying you’ve traveled the world because you look at travel brochures all the time. There’s nothing like first-hand experience, as noted here.
How to Get Started
The complimentary past newsletters and articles on our website at DavidTanzer.com is a great place to begin. International tips are located here. Many individuals are motivated by becoming – or remaining – a sovereign individual, and here’s why.
To learn more about the legitimate use of International Trusts for other integrated planning purposes, our book How to Legally Protect Your Assets, 2nd edition, is a next good step. Or to learn more about the correct way to go offshore, read Offshore Living & Investing, 2nd edition.
And if you wish to start now and learn how to proceed with a confidential consultation to review your personal situation to accomplish your objectives, then contact me here. I look forward to talking with you.
Until next time……
David