To develop an effective estate plan, expatriates must carefully consider the unique circumstances of living in another country. Here are a few tips.
If you still own assets in the United States, one of the first things you’ll want to do is use a power of attorney to name an “attorney-in-fact.” An attorney-in-fact (often called an “agent”) is someone you empower to make financial decisions on your behalf while you are out of the country. Ideally, this person will be physically near your assets to help you manage them from abroad. You can give your agent the power to:
Your power of attorney document may include specific instructions to the person you choose for this role. For example, you could instruct your agent to provide you with a summary of your finances, prepare accountings for you, or to check with you before making major decisions. Your agent will be legally required to act according to your instructions and in your best interests. So, you will still control your finances, but you’ll do so through your agent.
The laws that regulate health care differ in every country, so to make sure you get the medical care you want, make health care directives in your home state and in your new country. In your health care directive, you can name an agent to make medical decisions on your behalf and you can also describe the kind of medical care that you want (or don’t want) if you can’t speak for yourself. You can usually get health care directives in a local medical facility, but if you can’t find one, contact a local attorney to draft these documents for you.
Wherever you can, name your agent as your emergency contact and put that person’s contact information in places where it would be found in an emergency: in your purse or wallet, on an emergency contact card, in your day planner, in your cellphone, and in other documents you carry with you or in your vehicle. If you have a primary health care provider, give that doctor the name and contact information for your emergency contact and a copy of your health care directive.
You may have strong feelings about where you would like to have your funeral and where you want to be buried. You may decide that your new country is your new home, or you might decide to return stateside. Consider making these arrangements during your lifetime, rather than delegating the task to someone who might be in another country. You can either make arrangements directly with the service providers or purchase an insurance policy for this specific purpose. Share this information with the executor of your will, who will likely carry out your final wishes after death.
Estate planning is often more complicated for expats who may own property in more than one country.
The kind of will you need may depend on where your property is located. If you own property only in the United States, you can use a will designed for use in the United States. If you own property only in your new country, you need a will that is valid in that country. However, if you own property in more than one country, you might consider more sophisticated options like an international will or multiple wills. In that case, you will likely need the assistance of one or more attorneys.
An international will is designed to be used in multiple countries. Only countries and legal jurisdictions that signed the Washington Convention consider international wills legally valid. These include:
Some estate planning lawyers in the United States are familiar with these wills, so you might be able to have a local attorney prepare this type of will without having to learn about the laws of your new country or dealing with language barriers.
A multi-jurisdiction will covers property in several different jurisdictions. This type of will must be carefully drafted so that the wording doesn’t cause problems in either country, so get help from an attorney who has experience drafting these kinds of wills for your countries. Sometimes an attorney in one country may work together with an attorney in another country to make sure the will properly addresses the laws and property in both countries.
A situs will works together with your primary will. Your primary will is based on the laws of the country where you live and it covers the property that you own there. Your situs will covers the property you own in other countries or jurisdictions. This can be a useful strategy in case the country where some of your property is located doesn’t recognize your primary will. Additionally, some countries will only allow someone to be named an executor if they are a resident of that country, so you can name a local executor for your situs will if the executor of your primary will lives somewhere else. A situs will must comply with the requirements of that specific jurisdiction, so it’s important to have an attorney familiar with the laws of that country draft the will.
Even if you don’t need to worry about U.S. federal estate taxes (which affect only the very wealthy), you might be subject to estate tax in your new country because some countries base estate taxes on your domicile (where you currently live) rather than your official country of residence. Get help from a financial adviser or tax specialist to learn about your potential tax liability. Also, ask your American attorney about whether you may still be subject to U.S. income and capital gains tax laws while living abroad.
Putting your property in a living trust may help minimize estate planning complications because property that passes through a trust does not have to go through probate. The probate process is often complicated, time-consuming, and expensive – even for people who don’t have property in multiple countries.
You can also use a living trust to provide clear instructions on what should happen to your property after you die or become incapacitated while you’re living abroad. Further, using a trust may also help you avoid some of the drawbacks of confronting the laws in your current country. For example, some countries have forced heirship laws that require you to split your estate by percentages between certain family members. If you trust owns your property (instead of you), you may be able to escape these laws.
Trust laws vary by country, and every trust document will be based on the laws of a specific country. So for property you own in the United States, use a trust based on the laws of the state where that property is located. Talk to an attorney in your new country to create a valid trust there, or get help from an experienced international attorney to make an international trust that addresses property in more than one foreign jurisdiction.
If you live abroad, talk to a local attorney about your situation and to find out what kind of estate planning you might need. Depending on the property you own, you may also need to get advice from an attorney in the United States. These lawyers can help you determine which rules may apply to your situation and can help create a plan that works to protect you and your property.