Thinking about moving abroad after retirement? You are not alone as many American people are considering the same. Financial considerations are the most compelling reason for these seniors to look overseas. The cost of living in America is very high and many people can’t afford to stay in the country after retirement, which is why they consider moving abroad.
While you might be able to travel overseas after retirement, your estate plan won’t travel too well. When you move out of the country, your estate plan would be subject to new laws that were not taken into consideration when trusts were being created and wills were being drafted. Below, we have discussed some issues that you should pay attention to when creating an estate plan if you plan to move abroad after retirement.
When you are thinking about moving abroad and want to create an estate plan that will be applicable in the new country, discuss everything with a qualified estate planning lawyer in the new country. Do this at least a year before you move. The estate planning lawyer in that country would be able to advise you on issues relating to the laws of the country. It is important that you select an attorney who understands estate planning complexities for the American people. This, however, doesn’t mean that you should abandon your U.S. estate planning attorney. You should discuss all the matters with both the attorneys so that you understand everything about estate tax and other matters relating to your assets.
Take assistance from each of the attorney to draft a will for the distribution of your assets. This way, there won’t be any issues after your death and your assets would be distributed to your beneficiaries. Some estate planners advise people to create multiple wills – one for each country. For example, you can create a will for the distribution of your assets in America and another for the distribution of the assets in the new country. However, there is some risk in this strategy, which is why we recommend that you only create one will with the assistance of your estate planning attorney.
Your estate plan may include trusts. If this is the case, it can be dangerous for you to move abroad with your estate plan. The reason is that the trust might not operate the same way in the new state because their tax laws would be different. A trust is recognized under the U.S. law; however, it isn’t rare to encounter problems in some countries. There is a possibility that the trust will not be given respect in the new country and the wishes of the deceased would not be granted in the same way as they would have been in the U.S. The laws of the new location might be different than that of the U.S. and as such, the trust might become useless. There have been some reforms in laws of other countries to better accommodate the trusts of immigrants, but complexities remain. Therefore, if you relocate to a civil law jurisdiction, your trust might not be able to help your beneficiaries after you are gone.
For example, in the United Kingdom, if you are an American retiree and you have assets in a living trust, then this trust will trigger income tax. These taxes will not trigger if the assets were directly held by the expat retiree. If you decide to terminate your trust or leave the country later, you might have to pay taxes even on unrealized gains. American people who are moving abroad should also be careful about creating trusts in the new place. The IRS has a broad definition of what is considered a trust and there is a possibility that a partnership or business arrangement in the foreign country may be constituted as a trust. This can have serious consequences for the person who has created the trust and their beneficiaries.
Estate planning can be a very complex matter when you are planning to move abroad. It is important that you have all the things reviewed by a competent estate planning attorney in your home country as well as the new target country. This way, you will be able to create an estate plan that meets the requirements of the new country. If you don’t create an estate plan that is right for the new country, you could get into serious trouble and your beneficiaries may not be able to get the assets that you plan on leaving for them after you are gone.