What to Know about International Estate Planning

For international account holders, the estate planning process moves beyond a simple documentation process to a more complex process without a "universal" legal standard. International estate planning can involve different jurisdictions, local inheritance laws, and tax processes—making the estate and tax planning process potentially more difficult for those with a global footprint. Five hurdles international account holders may face include:

Differences in jurisdictional estate laws can add additional layers of complexity to the estate planning process. Depending on where you live, you may have to navigate diverse legal and regulatory landscapes as each jurisdiction plays by a different set of rules.

Not having a standard beneficiary designation process for international account holders can also complicate the estate planning process. For example, some international jurisdictions do not legally recognize beneficiary designations and instead follow forced heirship laws. This would effectively override your designated beneficiaries.

Variation of local inheritance laws and cultural differences across markets can also add an additional variable with international estate planning. In some instances, litigation risk can occur when local and/or foreign assets are transferred against local inheritance laws.

Inheritance estate taxes work differently from country to country. Tax issues can complicate the estate planning process because different countries may claim the right to tax your assets at death. Upon your passing, different countries may simultaneously claim the right to tax your assets based on your residency, citizenship, or the physical location of your real estate.

Understanding how your local estate taxes work can potentially help protect you and your heirs against double taxation.

Note: In addition to the designation of beneficiaries, certain tax documents and requirements may be necessary to ultimately transfer assets to the beneficiaries, including but not limited to requirements of the U.S. Internal Revenue Service and/or any other taxing agency or authority.

Bilateral and gift tax treaties between the U.S. and other foreign countries can be especially vital for high-net worth earners as they sometimes provide more favorable terms, such as lowering the overall tax burden or clarifying which country's tax system takes precedence. Understand any tax treaties that may exist between the U.S. and your home country and how they could impact your estate plan.

Language barriers can exist, particularly when your heirs live in a different country from you. Navigating unfamiliar legal advice and systems, transferring assets, and/or unintended tax implications with local inheritance laws and probate processes can be particularly challenging when language barriers are present.

Given these unique challenges, a proactive approach to estate planning can help alleviate some of the complexities global families can face. If you're a non-U.S. citizen holding an international account(s), here are three key considerations to keep in mind while you and/or your local attorney create an estate plan.

Before creating your estate plan, work to understand your specific country's inheritance policies and gift tax laws and how they may impact how you or your local estate attorney structure your plan.

It's highly recommended to work with a local estate planning attorney or estate planning team who are well-versed in the legal systems of your home country and have experience with international estate planning to help guide you through the planning process.

Your designated beneficiaries and trusted contact information on your brokerage account should be consistent across all your estate planning documents. Equally as important, ensure your estate plan aligns with the local and jurisdictional inheritance laws applicable to you.

While the estate planning process can feel overwhelming due to the intricacies of varying legal systems and tax structures, having a well-documented estate plan is an essential part of a comprehensive financial plan.

A well-structured estate plan helps ensure your assets are distributed efficiently and according to your wishes. Beyond asset distribution, an estate plan allows you to make critical decisions in advance, making sure you have provisions set in place in case you become incapacitated.

Having an established estate plan that aligns with your jurisdictional inheritance laws can provide you and your family members with confidence and a peace of mind knowing your wishes will be followed upon your passing. Furthermore, having an estate plan in place can help alleviate the stress and financial burden your beneficiaries could otherwise face while trying to settle your estate.