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Estate Planning Tips: Offshore Assets and Foreign Residence

January 8, 2019

 

It is becoming more popular for American citizens to either reside or have assets in foreign countries, which means they are subject to the laws of another jurisdiction when it comes to ownership, taxes and transfers.  Whether they are remote workers, retirees, investors or expat employees, there are some things to consider when it comes to estate planning.


Foreign Residents


If you are a US citizen living either temporarily or long term in a foreign country, you have to think about the effect on your estate plan and heirs if you die abroad.  The first step is to make sure that your attorney or family members know where you are and have access to your will or trust.  In order to begin probate or administering trust assets, usually a death certificate is required, which would need to be obtained from the foreign location.  


You should also have some provision for being returned to the US without too much delay.  Depending on circumstances, local authorities may have some say over how this is handled, and having a local attorney standing by can be a good strategy against the unforeseen.


Offshore Assets


It is not uncommon for US citizens to have foreign bank accounts, investments or property, and it is perfectly legal as long as all IRS rules are met regarding reporting requirements.  The issue that arises is how those assets can be accessed in the event of death, either at home or abroad.


Typically, assets held in a foreign country will be subject to local laws, regardless of the nationality of the owner.  For example, if you live in Mexico and have a bank account at a bank in Mexico, that money cannot be transferred or withdrawn by a US trustee or heirs without meeting Mexican requirements.  


In other words, your attorney would need to work with Mexican authorities to secure and transfer the assets, and some countries are fairly strict about this process.  It is important to consult with a foreign attorney to ensure your foreign assets are set up to comply with their requirements and process.  


Finally, the use of offshore trusts and other instruments have been popular to either minimize or avoid US taxation, and if that is the case your heirs should be prepared for the IRS to take an interest in the estate assets after your passing.  


Living and investing in foreign countries can be rewarding, but also requires some advance planning to account for the difference in laws from the US.  
 

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