Protection of Overseas Assets in a Will

When creating a will, it’s important not to overlook or fail to consider any overseas assets you may own.  These would be assets or investments for which the company or market is primarily outside of the United States. 

The term “overseas assets” can apply to a wide range of property, from physical property and homes to foreign bank accounts, digital investments, and foreign market investments.  If you are unsure about the foreign versus domestic status of an investment, it’s recommended that you consult with an estate planning attorney who can help with such matters. This article will delve into some nuances regarding how foreign assets are treated when estate planning in the United States.  

Why Do Overseas Assets Require Specific Attention?

Let’s begin by noting that different countries have different inheritance laws.  That makes it particularly important to properly identify and address overseas assets when creating your will.  If overseas assets are not handled correctly, they will be subject to the inheritance laws of another country, which may result in a much different inheritance outcome than you may want.

While you may have a general understanding of what would happen to your domestic assets if you pass intestate (without a will), your foreign assets may receive a different treatment than what you would expect. For example, someone who dies intestate, and without any children, with assets in both Switzerland and the United States, would see a different distribution of their assets in the two countries.  In the United States, the spouse would inherit the entire estate, whereas in Switzerland, the spouse would inherit 75% of the estate while the other 25% would be given to other relatives such as siblings and parents.  

When consulting with a United States attorney about drafting a will, you should be sure to disclose your foreign assets as well as domestic assets.  It’s understandable for one to think that overseas assets would be irrelevant to their domestic attorney, however, it’s always best to provide them with as much information about your estate as possible, so that they can recognize and avoid any potential issues that may arise. 

What Happens to Overseas Assets Upon Death?

While there is no one answer as to what happens to overseas assets upon death, a general standard of caution should be applied when handling these assets.  While France may handle your assets differently than Switzerland would, it is true that an estate plan should be made ahead of time to mitigate ramifications that could result from holding assets in different jurisdictions.  

An example of this would be India. India’s intestate laws call for a distribution that is governed by religion.  In India, for people of Hindu faith, there are instances where a male and female dying intestate can produce slightly different outcomes, namely when a male dies intestate, his mother has the right to a share of the son’s estate.  This is not the case for a woman who dies intestate. To further complicate matters, India’s intestate laws also differ for people of the Muslim faith, whose property will be distributed in accordance with the Quran and other religious sources.  

Israel is another example of a country with differing intestacy laws.  In Israel, if there is a surviving spouse, the children of the decedent would not be entitled to any of the non-real estate assets, namely bank accounts, artwork, or stock holdings.  

A properly executed will can offer you a level of confidence that your assets will be distributed as you would have wished, even if some are held outside of the United States.  Since different jurisdictions have different intestate laws, dying without a will that addresses all of your assets could result in unforeseen, unwanted outcomes.   

NJ Title 3B:5 explains what would happen to assets of an intestate estate in New Jersey.  There is a succession chain that can be fairly well understood by residents of the state.  In contrast, the intestate laws of different jurisdictions around the world are less predictable.  That’s why in many cases it would be in your best interest to consult with an attorney whose expertise lies in estate planning.  Seeking an estate planning attorney to help sort through these issues in advance can ensure your final wishes are followed, and your heirs will likely face less stress and uncertainty.

What’s the Solution?

It’s quite common for individuals with overseas assets to maintain two separate wills: one for their domestic assets, and one for their overseas assets.  It is critically important that all of an individual’s assets are accounted for in their estate plan.  The reason why some individuals opt for two wills is because this allows for both the domestic and foreign assets to be properly handled in a document that follows the particular guidelines of a jurisdiction.  When it comes to protecting your assets after death, it may be useful to get creative within the bounds of the law, and creating two separate wills is one way to do that.

A United States will may be recognized by a foreign country so long as that will is legitimately valid in that foreign country.  This could require particularized knowledge, specific formatting, or certain will execution mandates.  The intricacies that some jurisdictions include in their estate planning law could result in a United States will being invalid in that jurisdiction.

It is also possible that a foreign country may not accept United States wills altogether, thereby invalidating any United States will that addresses your foreign assets.  While a United States will would still be necessary to protect your domestic assets, creating a second will for the jurisdiction in which your foreign assets remain is a viable option.  While it is worthwhile to first have a United States estate planning attorney explore your situation first, the answer may be to ultimately seek additional legal assistance in the country in which your other assets are located.  

Moreover, there is something called an international will, which is accepted by select countries as well as some jurisdictions in the United States. While the acceptance of international wills is narrow, for specific individuals, it may be another option worth exploring with your attorney.  Unfortunately, neither New York nor New Jersey has ratified this treaty, making international wills a moot course of action for residents of these states.  

Tax Consequences of Overseas Assets Upon Inheritance

Foreign assets, upon a decedent’s death, can be subject to double taxation, meaning the same asset could be taxed twice.  The asset could be taxed once by the country in which the asset is located, and a second time by the United States upon distribution to the will’s beneficiaries. 

Tax law is vastly complex, but is frequently a point of interest for estate planning clients.  There are steps that can be taken to mitigate the amount of your estate that is lost to taxes.  With respect to overseas assets, one factor to be mindful of is the United States’ foreign death tax credit.

The United States offers a tax credit to some estates of United States citizens.  The primary factor is that the estate must have paid taxes to the government in which the overseas asset is located.  Another factor is that the decedent must be a United States citizen at the time of their death.  There are other factors that determine whether taxes paid by an estate on overseas assets can be credited by the United States.

For further questions about the specifics of double taxation or a foreign death tax credit, we recommend speaking with your tax professional to ensure that one gets advice specifically tailored to their particular circumstances.

As addressed in the sections above, it may be better for you to separate your domestic and foreign assets into two or more separate wills.  If you currently have one will that contains both your domestic and foreign assets, that may be an effective way to distribute assets upon death.  It may, however, still be best to consider creating two wills.

If one will contains both domestic and foreign assets, and there is a possibility that the will was created without carefully accounting for the global differences in estate law, then it may be best to revise that will with the help of a legal expert in that jurisdiction.  

If you have any uncertainty about the validity of your will with regards to either their domestic or overseas assets, you should consult with an attorney in the same jurisdiction as your assets to ensure their property is effectively protected.  Even if you already have two separate wills, you should consider having attorneys from the relevant jurisdictions review the will for the assets in that jurisdiction in order to create a higher degree of confidence for the validity of the will.

Who Should I Contact for More Information?

Creating a personalized estate plan that carefully designates all of your assets – including those overseas – while also meeting the relevant requirements for each jurisdiction, should be addressed by an attorney.  In fact, making sure that both your domestic and foreign assets are accounted for may require the help of multiple legal and tax experts. For example, if you hold assets in a foreign country that you would like to include in your will, or if you are uncertain about the effectiveness of your current will in that country, we recommend also seeking advice from an attorney in the jurisdiction where those foreign assets are located.

Our attorneys at Rosenblum Law can effectively assist you in starting the process by creating a will for New Jersey and New York residents.  This is an important step in safeguarding your domestic assets and ensuring that they are distributed the way you would like them to be.

Contact us today for an initial consultation.

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