Generally, there are three factors that determine whether “international
estate planning” is needed: foreign located deceased, foreign located
beneficiaries, and foreign located assets. This is not always a straightforward
process because the laws of different countries define residency/domicile
and characters of assets differently. For example, a U.S. citizen who
lives in another country with an intention to remain indefinitely is domiciled
in that country. However, a person can keep domicile in one place while
changing residences. Nomads who constantly move to different countries
can keep a domicile in the U.S., while maintaining residences in several
Recent changes to U.S. tax law mean that the vast majority of estates will
not need to worry about
estate taxes. The law will provide an $11.2 million exemption for each individual,
which means that a couple can exclude $22.4 million with some planning.
However, in the year 2026 the exemption will revert back to the level
in 2017 which was $5.49 million. But what the U.S. has given in the form
of an estate tax break, other countries may take. These laws also operate
differently. For instance, while U.S. tax law taxes the estate itself,
some countries tax the beneficiaries. Therefore, if a US citizen has beneficiaries
who are citizens or residents of a different country, it is possible that
transfer of assets at death can be taxed twice – to the estate (if
the estate is subject to U.S. estate tax) and to the foreign beneficiary.
Currently, the United States has estate tax treaties with 15 countries,
which can help US citizens avoid double taxation.
Non-US citizens are generally not subject to US estate tax unless they
are domiciled residents in the US. However, their estate exemption amount
is only $60,000. Also, if a U.S. resident receives a gift or inheritance
from a foreign source, such gifts may need to be reported to the IRS.
In addition to tax issues, the succession laws in foreign countries may
differ from those in the U.S. Then there are the issues with admitting
a foreign Last Will to probate in the U.S. Many states allow a foreign
Last Will to be admitted if it is translated into English. However, if
the Last Will uses terms not found in U.S. law, interpretation can be
The death of a loved one is difficult enough, and international issues
make matters worse. Our
Longmont estate planning team can analyze the tax laws and succession rules governing your estate and walk you
through the process.