In our practice, we have a significant number of clients who own real property or have bank account in a foreign country whether China, Mexico, England, Costa Rica, England, Canada or France or other countries. Our clients are becoming more global and mobile, especially when buying properties abroad for retirement, vacation or for their families.
One issue that arises with foreign property is the risk of double taxation. It is possible that when foreign property is transferred, U.S. estate tax will apply, but so will the tax of the foreign country. When a citizen of the United States dies and owns property in a foreign country, the property in the foreign country will be subject to U.S. estate tax if the estate is subject to taxation at all. There are treaties with certain countries which prevent the double taxation and give credit.
Another issue that comes up is multiple wills in different jurisdictions. Somestimes one last will and testament may ultimately revoke another. When ttwo wills are needed, it is important that attorneys from each country work and coordinate the estate planing and wills.
If there is no will or trust, in civil law countries, such as France, the property vests in the decedent’s heirs immediately upon the death of the decedent. This is unlike the United States and other common law countries, where there generally must be a personal representative or executor to transfer title or, at a minimum, some sort of court recognition of the death and transfer of property.
For example, if a client owning property in France desired that property vest in a long time companion and there was no will or trust, the property would immediately vest as set forth under French succession laws. On the other hand, if the client wanted the property to vest in their heirs, then drafting a will in France to deal with the French property would be not be needed.
We work with attorneys in other countries while advising clients with foreign property during the estate planning or probate phase. It is always best to address these issues during estate planning rather than going through the difficult and expensive process of dealing with them after death through the probate process. As we live in a more global society and smaller world, these issues are becoming more common. Don't forget to prepare for all your estate planning and probate issues, particularly when foreign real property is involved.