Many of our clients live in an increasingly mobile world, owning property or assets in multiple countries, or maintaining dual citizenship. They may also be United States (US) expatriates or a US person married to a non-citizen spouse. The estate planning process for these clients is likely to be more complex because each country has different laws or statutes regarding wills, trusts, and taxes. As a result, it is imperative that estate planning practitioners have a basic knowledge of the applicable US and foreign laws and rules, as well as commonly used estate planning strategies. It is not enough to assume that a will or trust created in the US will be honored in another country.
Research applicable law
When advising multi-national clients, you should always perform some initial research regarding the relevant country's applicable laws. An important factor in researching the law is determining that country's legal system. There are two main legal systems used throughout the world. These systems include “common law” and “civil law.”
It is also advisable to contact a licensed attorney in the country where the client's property or assets are located. You can then work together to ensure that the client's wishes are carried out. This may mean the formation of an international will or creating wills in each jurisdiction.
Common Law System
The common law system consists of more succinct laws and statutes and affords more discretion to the courts to apply a set of facts to the applicable law. Regarding estate planning, a person is free to determine how to pass his or her assets at death, whether to family, friends, or charities. This includes devising an estate plan which usually includes a will and/or a trust, choosing an executor or trustee, and even disinheriting family members. If the deceased person had an estate plan, that plan will be carried out and the laws of probate will apply. If a decedent died intestate, then the applicable intestacy laws will direct the distribution of decedent's property. These countries usually impose a tax upon the estate of the decedent prior to the distribution of the decedent's estate. There is substantially more flexibility and discretion given to the decedent under this system.
Civil Law System
An estate planning document, such as a US will or trust, is not always honored in these countries. Rather, succession statutes may apply and forced heirship will occur. The decedent may have little or no say in the distribution of wealth accumulated during his or her lifetime.
In some civil law countries, such as France, inheritance law is very restrictive and property vests in the decedent's heirs immediately upon the death of the decedent. France's succession laws make provisions to the surviving spouse based on the number of children in the family, and if there are no children, the spousal share amount is subject to whether the deceased spouse has a surviving parent.. In addition, a person may not be able to disinherit a family member in civil law countries. Such countries typically impose a tax on the person inheriting the property rather than the decedent's estate.
International Wills Act
Depending on the country, the International Will Act (IWA) may apply. The IWA was enacted in Washington DC under the UNIDROIT convention with the purpose of providing for a uniform international law on the form and standard for an international will. It was created in hopes of making international estate planning more straightforward and simpler. There are certain formalities to creating an international will including:
- must be for one person (no joint wills)
- in writing and in any language
- witnessed and signed by two witnesses and an attorney (please note a notary is not enough)
- all signatures must be at the end of the will
- if the will is more than one page, each page must be numbered and signed on each page
- if the testator is unable to sign the will, the reason shall be noted on the will
- a certificate should be attached to the end of the will, signed by an authorized person (an attorney), attesting that the procedures and requirements for drafting and execution of an international will have been satisfied
Many countries have signed a treaty or accepted the Washington Convention with the US to honor an international will, including France, Italy, Portugal, and Slovenia. This option should be carefully considered but may not be appropriate depending on your client's circumstance.
Another option to consider is creating multiple, separate wills in each of the countries where the assets are located. This is assuming that the country will honor a will. The multiple wills must be carefully crafted, and the estate planning attorneys must work together so that one does not ultimately revoke the other.
Tax implications should also be examined when determining the best estate planning option. This includes reviewing whether an estate tax or inheritance tax may apply. The potential of double taxation should also be investigated. This necessitates proper planning to help clients avoid taxes in multiple countries, if potentially applicable.
Once you determine the applicable laws and have contacted an attorney in that country, then you can work to devise a proper estate plan. Just as with any other major life change, always remind your clients that their plan may need updating if they acquire additional property or assets in another country. Failure to update an existing plan may result in unintended consequences regarding the distribution of assets.