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Getting Started With Estate Planning for U.S. Expats

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7 Tips for Establishing an Estate Plan as an American Living Abroad

U.S. expats face a wide range of financial complexities, and, unfortunately, estate planning is no exception. As an American living abroad, it’s important to have an estate plan in place to ensure your assets will be passed along according to your wishes.

The following tips can help you create an estate plan that supports your needs while living overseas.

#1 – Create situs wills.

A U.S.-based will may not be recognized by your country of residence. This can present challenges for your heirs should you pass away while living overseas. If you’ve already established a will in the U.S., it’s important to have it reviewed by an attorney familiar with the laws of your new country of residence (as well as U.S. laws). If you don’t have a will, there’s no better time than now to establish one.

Depending on local tax laws, you may need to create a “situs” will to govern the distribution of property held in a specific country. The situs will should be designed to work alongside your primary will to cover all of your assets. In this multi-will estate plan, your “primary” will may not be your U.S.-based will. It’s often more efficient and effective to begin your estate plan with a will based in your current country of residence.

There are many issues to be covered, such as the eligibility of your chosen executor to serve as executor under local law and the effect of the residence of your executor on the administration of your estate.

#2 – Consider a multi-jurisdictional will.

Instead of creating two separate wills, it may make sense to draft a multi-jurisdictional will to cover your property in different countries. If you decide to go this route, be sure to work with attorneys who have experience addressing the various succession laws of the two countries. It’s common for a will to cover your worldwide estate, but you’ll need to ensure the provisions of your will are acceptable in all relevant jurisdictions.

#3 – Re-evaluate any U.S.-based trusts.

U.S.-based trusts typically don’t operate as intended once the tax and probate laws of another country come into play. It’s important to work with an international wealth manager and estate planning attorney to evaluate the appropriateness of a trust in your estate plan. Unlike U.S. estate plans, non-U.S. estate plans generally don’t include a trust, which may have immediate tax and reporting consequences during your lifetime

#4 – Understand your tax obligations.

The U.S. has no federal inheritance tax, but it does impose a federal estate tax. Based on the value of your estate, a maximum 40% U.S. federal estate and gift tax will apply to any assets greater than the lifetime gift tax exemption amount, which is $12.92 million for individual filers in 2023 ($25.84 million for married couples filing jointly). Keep in mind that any foreign-held assets are also considered in the total exemption amount.

Fortunately for many U.S. citizens, the current high exemption means they have no (or very low) exposure to U.S. federal estate taxes. Therefore, their primary tax obligations are to their current country of residence.

However, in countries that have a tax on an estate or inheritance, the amount of the estate subject to tax and the rate of tax are often far less favorable than U.S. estate tax exemption amounts.

Work with your accountant and attorney to ensure your estate plan addresses:

  • Any anticipated U.S. tax obligations
  • Any anticipated tax obligations in your current country of residence
  • The probate and succession process for every jurisdiction in which you own assets

#5 – Consider naming an attorney-in-fact.

If you still own real estate in the U.S., it can be difficult to manage those assets from abroad. An attorney-in-fact is someone you designate to make financial decisions on your behalf while you’re living overseas. Ideally, this person lives near your U.S.-based properties and can easily manage any issues that arise.

Attorneys-in-fact are appointed using a power of attorney (POA). The power of attorney designates what specific powers you are granting to the attorney-in-fact, including:

  • Paying bills (such as insurance, property taxes, vehicle registration fees, etc.)
  • Selling assets (such as your home or car)
  • Managing everyday banking responsibilities
  • Applying for loans
  • Filing and paying income taxes
  • Serving as a contact for creditors
  • Buying and selling investments

Designating an attorney-in-fact can be extremely helpful to American expats in certain situations as they manage their stateside affairs. However, not every U.S. expat requires a POA. Depending on your specific needs, you may need a separate, non-conflicting POA for your country of residence.

#6 – Determine the need for healthcare directives.

A healthcare directive allows you to choose someone to make healthcare decisions on your behalf in the event that you become incapacitated and unable to make those decisions on your own. Be aware that your current U.S.-based healthcare directive may not hold up overseas. Because every country treats healthcare directives differently, you may need different documentation in your country of residence. Most countries automatically empower the next of kin to make such decisions.

#6 Organize and review your beneficiary designations.

As a U.S. expat living overseas, it’s especially important to ensure your beneficiary designations remain up to date, as your loved ones will likely face additional challenges in transferring your assets to the U.S. following your death.

Could you use some help establishing or updating your estate plan while living overseas? Creative Planning International is here for you. We specialize in helping U.S. expats and cross-border families maximize their wealth and avoid costly mistakes. We understand the complex interactions of multi-jurisdictional tax and regulatory regimes and help clients develop operationally and financially efficient retirement and wealth management strategies. Because we serve in a fiduciary capacity, you can be confident we’re acting solely in your best interests.

For more information, request a meeting with a member of our team.

This commentary is provided for general information purposes only, should not be construed as investment, tax or legal advice, and does not constitute an attorney/client relationship. Past performance of any market results is no assurance of future performance. The information contained herein has been obtained from sources deemed reliable but is not guaranteed.

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