International estate planning is recommended to members of families who live apart in separate countries. An international estate plan helps an estate owner from California and its beneficiaries who live and own assets in different countries. There are certain precautions to take when considering a cross-border type of estate planning.
An inheritance tax is charged to the person receiving the decedent’s assets in place of an estate tax. An American expatriate living in a foreign country may inherit property from the U.S. and pay heavy-duty taxes on the inheritance. The types and amounts of inheritance taxes vary widely based on the country’s laws.
Line of succession laws
Succession laws in different countries affect who can receive a decedent’s assets. Many countries around the world have restrictions known as forced heirship laws. The EU Succession Regulation allows EU residents to choose the country that they want to handle their estate after death. While living in a foreign land, they cannot assume that they can do whatever they want with their assets.
A country often has to decide if a resident is domiciled and must pay estate and gift taxes. In the U.S., a green card holder is considered to be a permanent resident. This resident has to pay U.S. estate and gift taxes based on certain factors in estate planning.
Estate planning for international living
Strict laws affect how an expatriate’s assets are distributed after death. The laws of an expatriate’s home country may vary significantly from the laws in the new country of residence. Not following the country’s regulations will lead to conflicts between estate owners, their beneficiaries and the countries where they reside.