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Estate planning is complicated enough in its own right. But when foreign assets are thrown into the mix, the process can become entangled in the international laws and tax treaties of several nations. So, how can individuals wade through the legal jargon to ensure their heirs receive assets in the most cost-effective way, while also staying compliant with international regulations?
The answer lies in appointing a team of qualified estate attorneys. Since international taxes and inheritance laws are often highly complex, it’s important for individuals to practice due diligence when seeking out professional advice, as this team will have the responsibility of making sure that wealth is transferred in an affordable manner.
Every nation abides by different laws concerning inheritance and taxation. In Lebanon, for example, inheritance laws vary depending on the religion of the descendant, says Kevin Pollock, an estate attorney based in Pennington, N.J. To that end, it’s necessary for individuals to retain a lawyer who lives and practices in each country where assets are held.
If a domestic attorney cannot provide overseas references, Janet Brewer, an estate planning attorney based in Palo Alto, Calif., recommends using a trade organization like the Society of Trust and Estate Practitioners to search for counsel in other countries. Individuals should look for a lawyer with at least five years of experience in estate planning, and the bar-equivalent certification in the country where they practice, Pollock says.
Once an international legal team has been established, individuals should consider appointing a domestic lawyer to lead coordination efforts. Both sets of attorneys will then collaborate on an estate plan that capitalizes on tax breaks and complies with each country’s regulations.
Language barriers and unfamiliarity with a foreign country can make it difficult for heirs to access foreign assets. To ease the transition, Pollock suggests individuals “simplify their asset classes.” Basically, the fewer assets one has to account for, the easier it is to transfer with minimal foreign legalities.
An estate planning team can assist individuals in choosing a strategy that will work to streamline the wealth transfer process:
o Consolidate bank accounts: If an individual maintains multiple accounts all over the world, his or her heirs will have a hard time tracking down the assets. “A lot of times, children don’t even know that their parents had accounts in these places,” Brewer says. She suggests that parents keep a list of all accounts in a secure place such as a home safe, and update the list periodically, perhaps around tax time.
To help simplify the process, individuals should consider merging accounts, where possible, with the help of a trusted online foreign exchange service that can offer relevant resources and expert guidance. Because these services are typically less expensive than similar bank services, individuals can hold on to more of their assets when transferring funds.
o Establish a holding company for real estate: A foreign property is one of the most difficult assets to pass on to heirs because it’s subject to heavy estate taxes in most countries. A way to bypass foreign tax jurisdictions is to retain the property through a holding company set up in one’s home country, Pollock says. This way, property can be inherited domestically without undergoing the hassle of foreign probate, or the legal procedure through which a descendant’s estate is administered and processed.
o Consider gifting: An individual has the opportunity to reduce their taxable estate by transferring assets to heirs through gifting. Gifts that qualify for the U.S. gift tax exemption — meaning their worth is below a certain threshold decided by Congress — are tax-free.
While advantageous, these streamlining strategies may not be possible for everyone. Depending on an individual’s family structure, citizenship status and the types of assets owned, different tactics may be employed. When they’re armed with a qualified estate planning team, individuals can ensure that their affairs are in order and their loved ones will be taken care of after they are gone.
“Every case is highly specialized,” Pollock says. “That’s why you need an attorney to advise you.”
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