As an expatriate, you need to know that you are one of 36 percent of Americans living abroad. Forty percent of expatriates opt for South America and Canada, while 26 percent love Europe.
Working as an expatriate offers unique opportunities. You will have to live in different countries for a large part of your life, which also gives you a world of challenges. However, many people that love this type of life don’t dream of eventually settling down when their time overseas ends.
While they have to learn about different cultures each time, they also face a lot of financial challenges while in the field.
One of the top issues that they face is to do with estate planning. These people don’t know whether they will transfer their assets back to the US or leave them there. This is why it is a good idea to plan your estate while you are still in the country rather than in a foreign land.
Let us look at the different issues that arise when it comes to expatriate estate planning.
Taxation
A significant concern with estate planning for expatriates is the double taxation that comes with succession. Many people that work in this position move to a country that doesn’t impose estate tax with the hope that they can avoid paying taxes.
Unfortunately, it remains that if you and your family are still US citizens, you have to pay tax on the property regardless of the country you move to.
Some countries have a treaty with the US, which allows them to skip tax as long as you have paid it in your home country.Differing Succession Laws
Many expatriates have an idea of the succession laws in the US but forget about the laws in the countries that they go to.
You need to look at the inheritance laws in the country that you decide to settle in because they are usually different from the ones in the US. For instance, in some states, the assets are transferred to the spouse when you die, while in others, the assets are transferred to the kids.
Keep the different stipulations in mind when you plan for your estate so that your property is distributed the right way when you pass away.
Buying Life Insurance
When you move to another country, the reality is that you have to purchase life insurance in that country. This is because some of the insurance laws that you come across in the country might not conform to the rules in the US. This might lead to unfair taxation when you die.
The interaction between the policies in the new country and the policies in the US might be very complicated, so you want to work with an estate planning lawyer to help you come up with the right decisions.
International Legal Systems
You need to understand that most times, you will be affected by the legal system that operates differently from the US system.
While the US uses a universal law to run its affairs, other countries use the “civil law” system that has different laws to the laws of the foreign country. This means that some of the laws that apply to the US won’t apply in all the other countries.
Talk to the estate planning lawyer to understand which laws might stand and which ones might have to go.
What is the significance of these laws? Well, the divergence between the legal systems that affect a US expatriate in an estate will lead to complications in estate planning.
Trusts
A trust refers to a legal entity whereby you hold your property for the benefit of a beneficiary. The trust is one of the ways to make sure your estate achieves the purpose that you intend it for.
The good thing is that the trust doesn’t have to be proved under probate when you die.
When you move to a foreign country, you need to understand whether the trust that you came up with within the US will still stand. For your information, you might be forced to review it and come up with an updated version.
Consider the implications of using trusts and tax consequences of gifting assets to the people that use trusts. Transfers of property from and to the trust might need changes in titles, which you need to be aware of.
In Closing
A time comes when you have to move from country to country due to work responsibilities, and when this happens, try and understand the various implications that come with this move. Talk to the estate planning lawyer to update your estate plan accordingly.
