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Reviewing and Organizing Your Beneficiaries as a U.S. Expat

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The Importance of Maintaining Updated Beneficiaries for Americans Living Abroad

Regardless of where you live, it’s important to maintain updated beneficiary designations to cover your investment accounts, your insurance policies and any other valuable assets. For U.S. expats living overseas, maintaining updated beneficiaries is even more important, as your loved ones will likely face additional challenges in transferring your assets back to the United States.

Here are six important steps to take as an American living abroad to help ensure your family will be provided for should something unexpected happen to you.

Step #1 – Build a net worth statement.

A net worth statement, or balance sheet, provides a financial snapshot of your financial position at a certain point in time. It shows the dollar value of both your assets and liabilities in order to arrive at an overall assessment of your net worth.

As it relates to your beneficiary designations, your net worth statement also serves as a list of all assets and accounts, making it easy to identify where assets are held. It’s good practice to go through this list one by one to double check your beneficiary designations for each account periodically. Your wealth manager can help you update any missing or outdated beneficiaries.

Here are some examples of the types of accounts you’ll want to review:

  • Retirement accounts – 401ks, solo 401ks, 403bs, 457s and other profit-sharing plans, traditional and Roth IRAs, SEP IRAs and SIMPLE IRAs
  • Life insurance policies and annuities – Term life, whole life, universal life, fixed annuities, variable annuities and other insurance products

Other employer-sponsored plans – Stock options, restricted stock, deferred compensation and defined benefit plans (where applicable)

Step #2 – Understand how international laws impact your estate.

Like so many other financial planning issues, beneficiary designations work differently for U.S. expats living overseas. For one, payable on death (POD) and transfer on death (TOD) provisions are not honored internationally, due to the difference between U.S. common law and foreign countries’ provisions. This makes having the proper beneficiary designations even more critical.

In addition, trust accounts can be challenging for U.S. expats to navigate, especially for those living in the European Union. If your current estate plan includes a trust, you’ll want to work with your wealth manager to determine what actions to take, as trust provisions often conflict with foreign gift tax and inheritance laws.

Step #3 – Create an emergency fund for your spouse.

While retirement account assets typically transfer quickly to U.S. expats living overseas, your spouse may experience significant delays gaining access to other types of accounts. An easy solution to this issue is to save in a liquid emergency account held in each spouse’s name. If you can manage it, plan to have up to six months of living expenses readily available to cover this interim period during which your spouse may not have access to all assets.

Step #4 – Properly designate each beneficiary.

It’s important to clearly name both primary and contingent beneficiaries along with their necessary contact information, including phone number, email address, mailing address and Social Security number. Remember that the person reviewing your beneficiary designations is someone who has not met your beneficiaries and is not familiar with their backgrounds or locations. Make it as easy as possible to locate your intended heirs.

Step #5 – Organize your beneficiary designations.

Consider putting together a snapshot of all your accounts and their associated beneficiary designations. Now that you have a net worth statement in place (thanks to Step #1 above), it should be a simple process to add beneficiary information to each account. Keep this document in a secure location where your loved ones will be able to access it following your death.

Step #6 – Obtain the proper documents.

If you’re the surviving spouse, you’ll need to have the following documents in place in order to transfer assets:

  • IRS transfer certificate – This document certifies that a U.S. taxpayer has satisfied any estate tax requirements and releases the decedent’s property for distribution to the appropriate heirs.
  • Foreign death certificate – A death certificate will be issued by the foreign country in which the deceased resided.
  • Consular report of death – The death of a U.S. citizen abroad should be reported to the nearest Bureau of Consular Affairs. Upon receiving a copy of the foreign death certificate, the consular will issue a report of death, which is an administrative document that provides essential facts about the death, the disposition of remains and custody of the personal estate of the deceased U.S. citizen. This document typically takes four to six weeks to complete.[1]

Need some help designating beneficiaries as a U.S. expat living overseas? Creative Planning International is here for you. We work with expats and cross-border families to help maximize their wealth and avoid costly mistakes. We understand the complex interaction of multi-jurisdiction tax and regulatory regimes and take into account currency, diversification and other portfolio considerations as we help implement custom estate and tax planning strategies to meet your specific needs.

[1] https://travel.state.gov/content/travel/en/international-travel/while-abroad/death-abroad1/consular-report-of-death-of-a-u-s–citizen-abroad.html

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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