For most people, executing a properly drafted Last Will and Testament ensures that all their estate assets will be distributed according to their wishes when their estate is probated. In some cases, however, a Will executed in the United States is not enough. An Oklahoma City probate attorney at Parman & Easterday discusses when a second Will might be necessary.
Do You Own Property in Another Country?
If you own property outside of the United States, estate planning can become both more important and more complicated. Foreign assets and income are typically treated differently for tax purposes in the U.S. The tax ramifications of any asset transfers, including those that occur at the time of death, must be considered in your estate plan. Of even more importance, your U.S. Will may not be honored in the country where you own property or assets.
Estate Tax on Foreign Assets
When you die, your estate assets are subject to federal gift and estate taxation in the United States. What happens, however, if some of those assets are in another country? Which country has the right to tax the transfer of assets? Although subject to change, the United States has estate tax treaties in place with the following countries: Australia, Austria, Denmark, Finland, France, Germany, Ireland, Italy, Japan, the Netherlands, Norway, South Africa, Sweden, Switzerland, and the United Kingdom. The treaties in place with these countries allow the country where property is located to tax the estate, provided that it is the non-domiciliary country. Further, if the domiciliary country taxes the estate for the foreign property, it must then provide a credit to the estate to cover the foreign country’s tax. For example, if a U.S. decedent owns property in Italy, Italian estate tax laws will apply. The United States will then provide a credit against the U.S. estate tax to offset the Italian estate tax. The estate will pay the higher of the two countries’ estate taxes. Only the domiciliary country may tax the personal property, such as vehicles and any furniture. In these treaties, the United States also reserves the right to tax the estates of its citizens as though the treaty was not in effect at all.
Do You Need an International Will?
If you own property in another country, you may be under the impression that the property can simply be included in your U.S. Will. Sometimes another country will honor a U.S. Will; however, more often than not they don’t. Executing a second Will in that country is frequently not a viable solution because doing so can serve to invalidate your United States Will. In Germany, you can execute a “Testament” which will only apply to your German assets, not those in the U.S. Not all countries, however, provide this option. As you can see, careful estate planning is necessary for those who own foreign property.
Often, the best solution is to execute an international Will. In 1973, the International Institute for the Unification of Private Law (UNIDROIT) held a Convention Providing a Uniform Law on the Form of an International Will. The purpose of the convention was to create guidelines to be used to determine when a Last Will and Testament may be considered an “international” Will. The guidelines agreed upon are as follows:
- The will may not be a disposition for more than one person;
- The will shall be in writing (may actually be handwritten or typed), need not actually be written by the testator, and may be in any language;
- The will must be signed in the presence of, and signed by, two witnesses and an authorized person;
- All signatures must be at the end of the will;
- If the will is more than one page, each page must be numbered, and the testator must sign each page;
- If the testator is unable to sign the will, the reason shall be noted on the will;
- A certificate must be attached signed by an authorized person, attesting that the requirements and procedures for drafting and execution of an international will have been satisfied.
Not all countries have enacted the Uniform International Wills Act. In fact, only about half of the states within the U.S. have done so to date. If you own property abroad, however, it is imperative that you discuss creating an international Will with your estate planning attorney to ensure that your property will be protected after you are gone.
Contact an Oklahoma City Estate Planning Attorney
For additional information, please join us for an upcoming FREE seminar. If you have additional questions or concerns about the potential need for a second Will, contact an experienced Oklahoma City estate planning attorney at Parman & Easterday by calling 405-843-6100 or 913-385-9400 to schedule your appointment today.
Yes, it is possible to transfer foreign assets into a trust; however, many of the same estate planning considerations apply to foreign trust assets.
Exactly how foreign assets you own are treated after your death will depend on the laws of the country where the assets are located as well as on any treaties we have in place at the time. Your estate could lose the assets, however, if you failed to properly include them in your estate.
That depends on the country and the type of assets. Many U.S. estate planning attorneys are familiar with the laws and treaties involving foreign countries. Consult with your estate planning attorney first about incorporating your foreign assets into your estate plan.