Consider your US Estate Tax and Probate Avoidance and the Impact of the Estate Tax in the Foreign Country of Your Residence

If you have assets or live outside of the USA you need to plan your estate carefully. You most likely need to do  Will or if applicable a trust in the country in which you live (or own  assets) which provides for the disposition of your foreign assets in the event of your death. You also need to determine what type of foreign  taxes (inheritance or transfer tax) your heirs may incur upon your death on your assets located outside of the USA.  In some foreign countries failure to do a Will or Trust could result in your offshore assets being distributed under that country's laws and could result in people inheriting the property other than those you would prefer.  Some countries may honor your US will or trust and others may not.  It is easier often have specific instruments drawn up in each country you own assets that comply with local law by a local attorney to avoid potential problems and expense later if that country does not honor or there are legal difficulties honoring a US will or trust.

Remember, if you have done a power of attorney appointing someone to handle your affairs, in many countries (including the US) that document will expire upon your death. So do not rely on that power of attorney holder to resolve the disposition of your foreign or US assets.

Of course, you must also prepare to US Will  and/or Revocable Living Trust (which avoids expensive probates in most US states which cost a lot of money and take even more time) to cover the disposition of your US assets. A Living Trust not only avoids probates, but allows your assets to be distributed to your names heirs, bills and taxes paid, etc. in a reasonable amount of time.  A living trust is also not public record and the disposition of your assets, the amount and to whom, remains private.   A living trust can also establish trusts for your minor children or grandchildren to administer their inheritance for them until they reach maturity.

  • The US does  impose its estate tax on your worldwide assets, though it will allow a credit in most situations for any foreign inheritance tax you had to pay on assets located outside of the US.  If you are married both you and and your spouse can secure a $5,000,000 exemption from estate tax each in the event you pass on in the 2011 and 2012.  After that, the exemption for each spouse goes back to $1million each.  If you estate exceeds the applicable amounts, the value of your assets above that amount will be taxed up to 35%. 

    If you are not a US resident and have assets in the USA, only the first $60,000 in assets is exempt from US estate tax. The amount of your estate located in the USA above that amount will be taxed.

    About 15 US states also have estate or inheritance taxes which may be in addition to your Federal Estate Taxes. 

    The  four essential must have US estate planning documents you need are:
  • Will
  • Revocable Living Trust
  • Durable Power of Attorney
  • Health Care Directive

    We can help you put together the proper documents to protect your US estate from probate, and guarantee its proper disposition.  We can coordinate your US estate plan with your foreign estate plan to obtain the lowest possible US estate tax.   We look forward to helping you.