International Probate and Estate Planning Law: What You Need to Know
Will You Need an International Probate and Estate Planning Lawyer?
This article will look at international probate and international estate planning and what constitutes both fields of law. It will also look at the legal professionals in those fields—what they do, scope of services, etc.
Introduction: An International Estate Planning Attorney’s Perspective
Estate planning is the process of helping a client plan what to do with their estate after they die—that is, with the disposal of it. Estate planning is typically executed in order to make clear the wishes of the client, to avoid the complications and costs of probate, and to reduce taxes and other expenses associated with the disposal of the estate. A person’s estate represents their net worth. It is the total of their assets, including financial accounts, legal rights, land, property, interests, and entitlements. In estate planning, all assets—tangible and intangible—are designated a beneficiary, and this designation occurs with the use of instruments such as wills or trusts. International estate planning is necessary when a person owns assets in a foreign country. Some people hire an attorney in that country to manage their assets. However, it is generally better to retain an international estate planning attorney in a person’s country of citizenship who is knowledgeable in the ramifications of foreign ownership, inheritance, and taxes both in that country and overseas.
Probate is the legal process of proving a will in a court of law and having it stand as the verified last testament of the person who wrote it. During probate, all claims on a person’s estate are resolved and the estate is distributed according to the wishes set down in the will. Probate courts (sometimes called surrogate courts) ensure that a will is properly executed. They enforce the provisions of a will and prevent injurious actions of estate administrators and executors. Probate courts also oversee the assets of people who die without a valid will (a status called intestate) and ensure that the assets are distributed equitably. If a will is contested, a probate court determines will authenticity, decides how the deceased person’s property will be distributed and identifies the proper heirs and beneficiaries. International probate comes into play when a deceased person has assets abroad—property or bank accounts or other tangible or intangible assets. International probate lawyers (known as international probate solicitors in the UK) are experienced in dealing with different countries’ laws and tax rules, and they have expertise in helping people whose deceased loved ones owned assets abroad. They streamline the probate process by being a single point of contact for clients. Now we will look more closely at estate planning and probate and the particulars of the fields as they occur in the international arena.
International Estate Planning (Estate Planning with Foreign Property)
The professionals: international estate planning attorneys The international estate planning attorney definition is the legal professional—the attorney or solicitor—who understands the multiple complex issues surrounding estate planning for people with international ties and who represents his or her client in planning and executing arrangements. What does an estate planning attorney do? International estate planning lawyers usually work with the international tax and corporate law branches of their international law firms to plan and execute the arrangements that meet their clients’ needs.
International estate planning needs for U.S. clients vary widely, depending on the client and case. A situation may involve, among others, a U.S. citizen living overseas, a U.S. citizen with a non-U.S. citizen spouse, or a non-U.S. citizen living in the United States. Typical international estate planning services by attorneys in the U.S. include:
- Estate planning for people with family and assets in other countries
- Advising non-Americans about U.S. transfer taxes
- Pre-immigration and expatriate tax planning
- Minimizing U.S. taxes on cross-border gratuitous wealth transfers
- Advising on information reporting requirements that pertain to foreign accounts, assets, and interests
- Estate and gift tax planning for U.S. citizens with foreign spouses
International estate planning has also become an increasing need for Britons, who, over the last twenty years, have been emigrating in increasing numbers. Five million Britons now live abroad; their top destinations include the USA, Canada, Spain, New Zealand, Australia, and South Africa. Britons have bought businesses and homes in their adopted countries while also maintaining properties and accounts in the U.K. An international estate planning attorney is important for Britons in this situation. An estimated 5,500,000 British citizens permanently reside outside of the United Kingdom. Their most popular countries of residence outside of the UK are Australia, Spain, the United States and Canada. Currently, well over 650,000 Britons live in the United States and it is estimated that as many as 80,000,000 Americans are of full or partial English ancestry. Obviously, Britons are not the only population that has become increasing mobile over the last two decades. We live in a mobile world where barriers to movement have largely disappeared and people from all countries are adopting other countries as their homes, purchasing properties and businesses in those countries, and engaging in investments across borders. For example, it is estimated that 140,000 Germans emigrate, or permanently relocate outside of, Germany each year. Well over 3,000,000 Germans live outside of Germany, with their most popular destination countries being Switzerland, Austria, Britain, Spain and the United States. Currently, over 1,000,000 German citizens live in the United States and approximately 50,000,000 Americans claim full or partial German ancestry. Estate planning attorney fees vary from firm to firm and are determined by the scope of the cases being handled.
Taxation in the context of international estate planning
Individuals and families with high net worth and with assets in multiple countries need international estate planning legal services to navigate the complex tax issues that accompany this kind of scenario. Advanced international tax planning is necessary so that unnecessary tax burden is avoided at the time when the property is distributed. U.S. citizens are taxed on their income worldwide. This means that U.S. citizens must report income that they earn overseas. Sometimes that income is also subject to Medicare and Social Security taxes. However, there are credits and exclusions available that, when claimed, can drastically reduce the amount of taxes owed. There are certain reporting requirements for U.S. citizens that own assets and hold accounts and interests in other countries. These are fairly stringent; people who do not comply with these requirements can find themselves subject to stiff civil penalties. They can even experience criminal penalties if their failure to report is considered deliberate and intentional. For these reasons, U.S. citizens must make sure that they meet all reporting requirements for their foreign-held assets and that they take advantage of all possible credits and income exclusions. Britons, Germans, Americans, and citizens of other countries are behooved to engage international estate planning solicitors/lawyers to help them navigate reporting requirements, tax credits and exclusions pertinent to their own locations. Double taxation is an issue that arises around foreign-held property. Double taxation can occur when a foreign-held property or asset is transferred and the owner is taxed both by their home country and also by the country in which the property was held. Some countries have what are called tax treaties with other countries. The United States, for example, has tax treaties with Australia, Austria, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, the Netherlands, Norway, South Africa, Switzerland, and the United Kingdom. (Note: this is a small amount of treaties compared with the 60-plus countries with whom the U.S. has income tax treaties). These treaties allow the country where the U.S. citizen owns property to tax that property. If the U.S. taxes the estate, then it has to provide a credit to the estate owner to cover the amount of the property taxation by the country where the property is located. For example, if a U.S. citizen owns property in Germany, the property will be subject to German estate tax laws. The U.S. will provide a credit to the owner that will cover the German tax. Even with the treaties in place, the United States can act as if the treaties are not in effect. In other words, it is not bound by the treaties. The language of the treaties varies from country to country. In the treaty with France, the U.S. has the right to tax property owned by U.S. citizens in France. This means that the potential exists of the property being taxed both by France and also by the United States. However, France can only tax the property itself. Other property, including possessions inside the house, may only be taxed by the U.S. Taxation on gifts to heirs is another area of regard when it comes to international estate planning. The amount of gift taxation can vary according to the closeness of the relationship between the donor and the recipient. Property given to a spouse or siblings is taxed at a lower rate (in civil law countries, which includes most of Europe, Latin America, and Africa) than if it is given to a more remotely-related heir like a cousin. An international estate planning attorney provides crucial help in understanding how a host country’s concepts of citizenship, residency, and domicile impact expatriates and their taxable status. In the U.S., for example, a person is established as a resident for income tax purposes if they are present in the country for a specific number of days of the tax year. Residency carries different implications than domiciliary, which is tied to transfer taxes. Acquiring domicile status comes about through living in a country without the intention of ever leaving it. Residency status bestows latitude for a person to stay in a country indefinitely or to leave it. In Britain, there are three residence statuses that can be claimed: resident, domiciliary, or deemed domiciliary. The status claimed determines income and transfer tax consequences, which can vary significantly.
Multiple Wills or Multi-jurisdiction Wills
People who own property in more than one country typically have multiple single-jurisdiction wills or a single multi-jurisdiction will. Single-jurisdiction wills apply to properties in one location (one will per country). Single-jurisdiction wills are less complex and faster to draft than multi-jurisdiction wills, so they involve fewer attorney fees. However, in the long run, multi-jurisdiction wills are often a better idea because they can avoid the confusion that can arise out of multiple single-jurisdiction wills and the resulting expenses that occur in sorting out the confusion. If a single-jurisdiction will is not crystal clear about which property it refers to, it will give rise to confusion that must be resolved before distribution of the estate can occur. Multiple single-jurisdiction wills can sometimes be in conflict with each other. This leads to necessary and expensive litigation to sort out the conflict and resolve the administration of the estate. The worst case scenario is if one single-jurisdiction will actually revokes another single-jurisdiction will. This can result in property or assets actually going into intestacy, which is the same thing that happens when someone dies without leaving a will. In intestacy, government laws and not the person’s will determine the distribution of assets. This is obviously undesirable for the person who has gone to lengths to draft wills and record their desires for the distribution of their estate. An additional possible problem is when a foreign property is not listed in any will. This can happen when a person drafts a will, then buys a property or asset, and does not update the will to include the purchase. This puts the property into intestacy, as in the example above. If used, single-jurisdiction wills must be very carefully drafted. Usually it is best if all attorneys drafting separate single-jurisdiction wills work together to coordinate the drafts and use consistent language so as to completely remove the possibility of ambiguity and confusion later on.
International wills came into being in 1973, when the International Institute for the Unification of Private Law held a convention with the purpose of creating an international will that would make international estate planning easier and less complex. For a will to be considered an international will, it has to meet the following requirements:
- Must be the disposition of only one person
- Must be in writing; can be handwritten or typed
- Must be signed in front of two witnesses and an attorney
- Must be signed by the two witnesses and the attorney
- Signatures must all be located at the end of the will
- Multiple-page wills must be numbered by page and each page signed by the testator
- If the testator can’t sign, the reason must be stated on the will
- A certificate must be attached at the end of the will attesting to the fact that an authorized person (attorney; not a notary) has met the requirements for drafting an international will
An international will is valid in all jurisdictions that signed the 1973 Washington Convention.
International Estate Planning Treatises and Resources
Online resources are available for those looking for education in the area of international estate planning. One example of an International Estate Planning Treatise is an online subscription called U.S. International Estate Planning (store.tax.thomsonreuters.com). It addresses tax and non-tax property transfers of U.S. and foreign clients. This particular treatise looks at U.S. income and wealth transfer taxes as they relate to cross-border planning; foreign death taxes; strategies for planning for taxes on U.S. estates, gifts, and generation-skipping transfers; cross-border planning; domestic and offshore trusts; U.S. information reporting requirements; and others issues. Topics covered in the treatise include:
- Planning for U.S. citizens with assets in other countries
- Income tax planning for U.S. citizens residing abroad
- Planning for foreign nationals who own assets in the U.S.
- U.S. Social Security considerations
- U.S. investments by foreign clients
- U.S. tax rules and foreign grantor and non-grantor trusts, foreign estates, and foreign beneficiaries of U.S. trusts and estates
- How “resident” status differs for estate tax purposes and income tax purposes
- Techniques for using lifetime gift tax planning in cross-border planning, including powers of appointment and discounting strategies
- Gift and estate tax planning with spouses who are not U.S. citizens
- U.S. income and transfer tax planning for nonresident aliens
Additional resources can be found online or at international estate planning institutes and international estate planning conferences. International Estate Planning as a Career Thinking about an estate planning attorney career? Estate planners come from a range of careers, including financial advisors, CPAs, insurance producers, and lawyers. Degrees in accounting, business, finance, law, economics, and insurance are good foundational educational tracks when pursuing a vocation as an estate planning attorney. An estate planning attorney job description is a lawyer that guides clients in selecting the right strategies for maintaining their estate after they die or in the case they are unable to manage it or make decisions. PayScale.com reported in 2014 that an estate planning attorney salary ranged from $40,000 to $129,000.
Probate Administration and Services The international probate process begins when a person who owned properties and assets in a foreign country dies. Law firms that offer international probate servicesemploy attorneys with expertise and experience in the international probate field. International probate firms are generally similar to domestic probate firms in that they seek to streamline the probate process, knowing that the time period following a loved one’s death is emotional and stressful for the client. The stress increases exponentially when foreign properties and assets are held and probate is required to sort out the distribution of the estate. Clients of international probate firms include estate executors and beneficiaries; family members; other lawyers who lack expertise in the area of international probate; accountants involved in the distribution and administration of the estate and in inheritance tax matters; estate representatives responsible for the sale of the foreign-held property; and wealth management companies and financial advisers. International probate firm lawyers handle a broad spectrum of tasks and responsibilities relating to an estate’s distribution. These include:
- Advising clients on inheritance taxation and planning
- Advising clients on property tax changes in the countries where the clients own property
- Instructions/recommendations on inheritance and international probate matters
- Transferring securities and bank funds to heirs and beneficiaries
- Handling the administration of public deeds and the transfer of inherited holdings
- Representing heirs who are not of legal age to represent themselves
- Handling foreign law affidavits and document notarizations
- Handling combative probate and inheritance situations
International Probate Services and Will Writing
Many law firms have international will writing services. Experienced international probate lawyers or solicitors will ensure through an international will that their clients’ multi-jurisdictional properties and assets are protected. Individuals who own assets in foreign countries but do not have an international will subject their families and loved ones to potentially years of costly legal probate work. Probate laws vary from country to country, and a client’s foreign property is subject to the laws of the country in which it is located. Law firms that offer international will writing employ writers and foreign property lawyers who take a client’s wishes and detailed instructions and craft them into a customized international will. These wills are generally checked by legal professionals to ensure that all requirements are met for it to stand as a legally recognized international will. Costs and fees The answer to the question How much do probate lawyers charge? is determined by the size and complexity of the case. While probate lawyers fees can be costly, there also exist some options for low-income individuals. Probate Lawyers Maricopa County (California) and the Estate Planning, Probate and Trust Section of the Maricopa County Bar Association and the Volunteer Lawyers Program of Community Legal Services have formed the Probate Lawyers Assistance Project. This is a program for low-income individuals who need pro-bono assistance with probate court matters. This program is designed to help those with probate court situations such as guardianships, conservatorships, informal and formal probates, and trust litigation. It consists of attorneys who volunteer half-hour consultations to answer legal questions and provide advice. International Probate Disputes Probate law, because it governs contested wills and deals with the division of assets between legal heirs, often gets into contentious waters. A contested will is a will that is challenged by one or more heirs. These heirs may challenge the will because they have not received an inventory of the property; or may claim that the deceased was under someone’s extraordinary influence that caused them to frame the will in a manner inconsistent with their known desires or convictions; or the belief that another heir is getting more than is rightfully theirs. International Estate Planning and International Probate Law Firms Not all law firms offer services in the areas of international estate planning and international probate. Urban Thier & Federer, P.A., International Lawyers, offer services in a range of fields that include Business and Commercial Law; Wealth Management; International Tax and Business Entities; Personal Injury; Wrongful Death; and Wills, Trusts, Estate Planning and Probate. Our attorneys and legal staff in the United States, Germany, and the United Kingdom are uniquely qualified to represent clients in all aspects of international estate planning and international probate.